New Zealand central bank raises rates by 25 bps, flags gradual tightening path
New Zealand’s move reflects a broader hawkish shift among major central banks
The Reserve Bank of New Zealand (RBNZ) increased its official cash rate by 25 basis points to 2.75 per cent on September 2. This was the first rate hike in over three years and comes after inflation remained stubbornly high and economic growth started to recover. The bank expects further rate hikes will be needed gradually to bring inflation back to its 2 per cent target while supporting growth and employment.
The RBNZ sees significant downside risks to the economy. Inflation is projected to peak at 4.1 per cent in June 2026 compared to 4.3 per cent previously. The economy is expected to expand by 0.5 per cent each in the final two quarters of 2026, up from previous forecasts of 0.2 per cent in the third quarter and 0.5 per cent in the fourth quarter.
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