Table of Contents
Summarised by Centrist
The Reserve Bank has held the Official Cash Rate at 2.25% in its first decision of 2026, but its language signals the easing cycle may be over, with the next move increasingly likely to be up rather than down.
Annual inflation lifted to 3.1% in the December quarter, sitting above the Bank’s 1–3% target band. The Committee said inflation is “most likely returning to within the… target band in the current quarter” and is expected to fall toward the 2% midpoint over the next 12 months.
However, risks are described as “balanced,” with demand strengthening and the possibility that businesses “could try to increase prices faster than expected, leaving inflation above the target midpoint.”
The Bank also signalled that as the recovery strengthens and inflation falls sustainably, “monetary policy settings will gradually normalise.” That language marks a shift from recent cuts toward a more neutral stance.
LJ Hooker’s Mathew Tiller said “the next move looks more likely to be up than down” if inflation stays sticky.
Unemployment remains elevated at 5.4%. Household spending is cautious and house price growth remains weak. At the same time, agricultural activity remains strong and investment is beginning to lift across sectors.
Ray White reported sales turnover across its New Zealand network has increased by around 11% year-on-year in recent months, with buyer enquiry lifting and decision timelines shortening.
