Reserve Bank of New Zealand’s (RBNZ) Governor Anna Breman presents the prepared remarks on the Monetary Policy Review (MPR) and responds to media questions at the press conference after the May monetary policy announcement.
Earlier on, Breman and her colleagues announced no change to the Official Cash Rate (OCR) decision, holding it at 2.25% as widely anticipated.
RBNZ press conference key quotes
All members agreed on path for rates, difference was on timing.
Members who voted to raise rates more concerned with second-round effects on inflation.
Members who voted to hold emphasized low core inflation, subdued wage growth, anchored expectations.
Longer term inflation expectations remain anchored.
Inflation outlook uncertain, many possible paths for rates from here.
OCR increases are likely at coming meetings, depends on data.
Even if Gulf conflict stops now, we still see inflation effects ahead.
Cannot completely rule out anything on rates.
I voted according to how I saw inflation going forward.
Financial conditions have tightened already.
Current OCR still a little bit on accommodative side.
With inflation, bigger things offshore to worry about than the budget.
This section below was published at 02:00 GMT following the Reserve Bank of New Zealand (RBNZ) monetary policy announcements.
The Reserve Bank of New Zealand (RBNZ) announced on Wednesday that it maintained the Official Cash Rate (OCR) at 2.25% following the conclusion of the May monetary policy meeting.
The decision came in line with the market expectations.
Summary of the RBNZ Monetary Policy Review (MPR)
Committee remains focused on ensuring that increased costs do not lead to elevated inflation over the medium term.
On balance, the OCR will most likely need to increase sooner and by more than envisaged in the February monetary policy statement.
Outlook for medium-term inflation pressures is also uncertain.
Weak demand and elevated unemployment will dampen medium-term inflation pressures.
The ongoing conflict in the Middle East is weakening economic activity and increasing near-term inflation.
Committee judges that the balance of risks is to the upside for inflation and to the downside for growth.
Minutes of the RBNZ interest rate meeting
Three committee members (Anna Breman, Karen Silk, Paul Conway) voted to leave the ocr on hold and three members (Carl Hansen, Hayley Gourley, Prasanna Gai) voted for a 25-basis point increase.
In this instance, the chairperson has a casting vote, meaning the ocr remains on hold at 2.25 percent.
Committee remains focussed on bringing medium-term inflation back to target and expect that OCR increases will be required this year.
All committee members agreed that increasing the OCR at upcoming meetings would likely be necessary to ensure higher near-term inflation does not feed through to higher medium-term inflation.
Pace of OCR increases will depend on the relative influence of persistent wage- and price-setting behaviour versus weaker economic activity on medium-term inflation pressures.
One member (Carl Hansen) emphasised that raising the OCR at this meeting would also create optionality for further monetary policy tightening in July.
Key takeaways from RBNZ Monetary Policy Statement
Currently, core inflation, wage growth, and medium- to long-term inflation expectations remain consistent with inflation returning to the 2-percent target mid-point over the medium term.
The Middle East conflict is increasing near-term inflation and weakening economic activity.
Inflation is expected to peak at 4.3 percent in the September quarter and to return to the 2 percent target mid-point in mid-2027.
Business contacts and surveys indicate weaker confidence and spending.
RBNZ sees Official Cash Rate at 2.51% in September 2026 (pvs 2.28%).
RBNZ sees Official Cash Rate at 3.07% in June 2027 (pvs 2.62%).
RBNZ sees TWI NZD at around 66.6% in June 2027 (pvs 68.0%).
RBNZ sees annual CPI 2.4% by June 2027 (pvs 2.0%).
RBNZ sees Official Cash Rate at 3.11% in September 2027 (pvs 2.71%).
RBNZ sees Official Cash Rate at 3.28% in June 2029.
NZD/USD reaction to the RBNZ interest rate decision
The New Zealand Dollar (NZD) catches fresh bids and extends higher in an immediate reaction to the RBNZ interest rate decision. The NZD/USD pair currently trades at 0.5862, up 0.41% on the day.
New Zealand Dollar Price Today
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.03% | 0.00% | -0.02% | 0.12% | -0.55% | -0.07% | |
| EUR | 0.06% | 0.02% | 0.04% | 0.02% | 0.14% | -0.50% | -0.02% | |
| GBP | 0.03% | -0.02% | 0.00% | 0.00% | 0.13% | -0.52% | -0.03% | |
| JPY | 0.00% | -0.04% | 0.00% | -0.01% | 0.11% | -0.54% | -0.05% | |
| CAD | 0.02% | -0.02% | -0.01% | 0.01% | 0.12% | -0.51% | -0.03% | |
| AUD | -0.12% | -0.14% | -0.13% | -0.11% | -0.12% | -0.63% | -0.13% | |
| NZD | 0.55% | 0.50% | 0.52% | 0.54% | 0.51% | 0.63% | 0.48% | |
| CHF | 0.07% | 0.02% | 0.03% | 0.05% | 0.03% | 0.13% | -0.48% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
This section below was published on May 26 at 21:15 GMT as a preview of the Reserve Bank of New Zealand (RBNZ) interest rate decision.
- The Reserve Bank of New Zealand is expected to maintain the key interest rate at 2.25% for a third straight meeting on Wednesday.
- All eyes are on the RBNZ’s Monetary Policy Statement and Governor Breman’s presser for fresh interest rate cues.
- The New Zealand Dollar could experience intense volatility following the RBNZ policy announcements.
The Reserve Bank of New Zealand (RBNZ) is widely expected to hold the Official Cash Rate (OCR) at 2.25% for the third consecutive meeting, as the impact of the Iran war continues to hit the economic growth and fuel inflation pressures.
The RBNZ interest rate decision will be announced at 02:00 GMT, accompanied by the Monetary Policy Review (MPR), the Monetary Policy Statement (MPS) and the Minutes of the meeting. RBNZ Governor Dr. Anna Breman’s post-monetary policy meeting press conference will follow at 03:00 GMT.
The New Zealand Dollar (NZD), which has been broadly consolidating against the US Dollar (USD) since mid- April, could see a big reaction to the RBNZ event risks.
What to expect from the RBNZ interest rate decision?
Barring any surprises on the rate decision, the RBNZ updated OCR and inflation forecasts, along with Governor Breman’s remarks, will be closely scrutinized to reaffirm the market expectations of at least two interest rate hikes this year in the face of the US-Iran war impact on energy prices and inflation.
“Our current forecast is for 50 basis points (bps) of tightening in 2026, though this is highly dependent on energy market dynamics. Swap market pricing is 21 bps for July and 75 bps by year-end,” ING’s FX strategists said.
However, amid inflation expectations returning to the RBNZ target range of 2%-3% and a negative economic output gap, it remains to be seen if the RBNZ pushes back against any near-term rate hike or surprises with a lift-off in a pre-emptive measure against high inflationary prospects.
Back in April, Breman noted: “We discussed raising rates at today’s meeting, adding that the Committee is “not yet seeing rising prices becoming embedded in inflation expectations.”
However, she kept the door ajar for rate hikes by saying that “tightening could be at every meeting or every other meeting, it depends.”
The OCR projections will be key to watch if the central bank doesn’t deliver an unexpected rate hike. In February’s MPS, the Kiwi central bank said that it sees the OCR at 2.26% in June 2026, while projecting 2.4% by the end of the year.
How will the RBNZ interest rate decision impact the New Zealand Dollar?
Any downward revision to the OCR forecast, citing weak economic prospects, could be read as dovish, reinforcing the selling pressure around the NZD and driving the NZD/USD pair back toward the 0.5800 level.
The Kiwi Dollar could also come under intense selling pressure if Governor Breman fails to provide any guidance on the tightening path.
However, in case the RBNZ surprises with a rate hike, it would be a clear bullish case for the NZD. That could initiate a fresh trend reversal in the NZD/USD pair toward the 0.6000 psychological barrier.
If the central bank decides to stand pat, as expected, but revises up the OCR projection for this year, it could be perceived as a hawkish hold, also serving positive for the Kiwi.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for NZD/USD and explains:
“The Kiwi pair now sits below the 50-day simple moving average (SMA) at 0.5853 and the 100-day SMA at 0.5890, while the 21-day SMA near 0.5894 also leans overhead, suggesting rallies are likely to face a supply area. The Relative Strength Index holds just below the 50 midpoint around 46, hinting that downside pressure still dominates, though without oversold conditions.”
“On the topside, immediate resistance emerges at a confluence of healthy resistances near 0.5890, where the 21-day SMA and the 100-day SMA converge. A clear break of that supply zone will negate the near-term bearish bias and initiate an uptrend toward the 0.5950 psychological level on its way toward the 0.6000 round level. On the downside, initial support is provided by the 200-day SMA at 0.5837. A sustained move beneath this longer-term average would reinforce the downtrend and expose lower levels toward the 0.5800 figure in the coming sessions,” Dhwani adds.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
