The Reserve Bank of New Zealand (RBNZ) maintained the official cash rate (OCR) at 5.5% during its May meeting, marking the seventh consecutive hold, and signaled a more hawkish outlook than anticipated. Subsequently, the New Zealand dollar surged past $0.612. The RBNZ stated that the current restrictive policy stance is necessary for a longer duration to bring inflation back within its target. Although the country’s annual inflation decelerated to 4% in the first quarter, it is still above the bank’s preferred range between 1% and 3% over the medium term. 

The committee emphasized the importance of sustaining the OCR at a high level to achieve the inflation target in a reasonable timeframe. While inflationary pressures from wages and domestic spending are aligning with expectations, inflation persists, driven by rising costs in housing rents, insurance, and other domestic services. 

The RBNZ has updated its rate peak forecast to 5.7%, up from 5.6%, and now anticipates beginning rate cuts in the third quarter of 2025, which is a delay from its previous forecast of the second quarter. The bank also projects that inflation will settle within the 1-3% target band by the year’s end. 

(Historical Interest Rates，RBNZ) 

( NZDUSD Monthly Chart)

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