RBNZ to lift OCR to 3% as inflation pressures mount

Reserve Bank of New Zealand is set to lift the Official Cash Rate by 25 basis points to 3% today, ending market hopes of a pause. Westpac chief economist Kelly Eckhold said the September pause signal will be outweighed by a weaker exchange rate and higher energy prices that have pushed short‑term inflation up. He noted data since September show a higher year‑end inflation outlook, a stronger GDP start, but also rising risks to consumer spending and housing investment. ANZ chief economist Sharon Zollner expects a brief, open‑minded statement and says the committee will likely decide to hike, though a split vote would not change the outcome. She added that election timing is not a factor in the decision. BNZ head of research Stephen Toplis also predicts a hike and points to fourth‑quarter inflation expected at 4.7%, well above the RBNZ’s 3.9% assumption. He warned an oil price spike could hurt disposable income but will not remove medium‑term price pressures. He cited MPC member Prasanna Gai’s warning about supply‑driven shocks. ASB senior economist Mark Smith said the RBNZ will acknowledge more work is needed after 75 basis points of hikes since July and will keep a conditional tightening bias. He highlighted the low NZ dollar and persistent fuel price rise as risks and expects further 25‑basis‑point hikes in October, December and February, with a peak OCR of 3.5%. Kiwibank economist Jarrod Kerr, the least hawkish, still backs a hike, arguing a quick increase followed by a long pause would give certainty amid global uncertainty. ## Context The OCR is the tool the RBNZ uses to influence borrowing costs; higher rates aim to curb inflation but raise loan repayments for households and businesses.