Reserve Bank of New Zealand keeps OCR at 2.25%

Reserve Bank of New Zealand (RBNZ) today kept the official cash rate (OCR) at 2.25%.signaling that monetary policy will remain accommodative for the time being as the economy recovers from a prolonged recession. The decision was unanimous and expected by market participants.

Key points from the RBNZ statement:

• Annual CPI inflation rose to 3.1% in Q4 2025, slightly above the target range of 1-3%.
• The Committee is confident that inflation will fall to an average of 2% over the next 12 months.
• The economy still has significant slack, with unemployment at 5.4%
• The economic recovery extends to manufacturing, construction and retail trade
• The risks to the inflation forecast are assessed as balanced
• Updated RBNZ OCR forecast signals possible tightening by late 2026 or early 2027

Link to the RBNZ Monetary Policy Statement for February 2026

This was the first monetary policy statement new governor Anna Bremanwho took over after the departure of former governor Adrian Orr and chairman Neil Quigley. It was also the RBNZ’s first decision since cutting the OCR by 25 basis points in November 2025 – a move that now appears to be the latest cut in an easing cycle that began back in August 2024.

RBNZ admitted this in its statement annual CPI inflation rose to 3.1% in the December 2025 quarterwhich is just above the top of the 1-3% target range. However, the Committee expressed confidence that with significant excess capacity in the economy, inflation would return to around an average of 2% over the next year. Core inflation remains within the target range and subdued wage growth is helping to contain underlying price pressures.

About economic prospects RBNZ noted that economic growth expands across sectorssupported by low interest rates and high export prices for dairy and meat products. GDP rose 1.1% in the September quarter after falling 1.0% in the June quarter, although the Committee warned that measured GDP data was more volatile than usual due to timing factors and measurement problems.

Perhaps the most moving element of today’s episode was updated OCR forecast. The RBNZ has forecast its first rate hike until late 2026 or early 2027compared to the November mid-2027 schedule. however, the projected tightening cycle remains smaller than markets had anticipatedand the cash rate is expected to reach just 3.0% by 2028. Before the decision, markets had about 1.5 rate hikes until the end of the year.

Governor Breman also announced that the RBNZ will increase the number of monetary policy meetings to eight a year from 2027, a move aimed at increasing transparency and accountability.

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Market reactions

New Zealand Dollar vs Major Currencies: 15 min

Kiwi sold out dramatically across the board upon release. NZD/USD fell 0.6%, falling below the psychologically important 0.6000 level and hitting a near two-week low. The move was below driven by a dovish surprise in the RBNZ rate forecastwhich was out of step with the tighter repricing that markets had built up ahead of the meeting.

There had been market speculation that the RBNZ would follow the Reserve Bank of Australia’s lead and signal an earlier start to its hiking cycle. Instead, the RBNZ deviated from that narrative, indicating that only about a 50% chance of one hike this calendar year was warranted. Traders quickly scaled back their expected pricing for a rate hike before the end of the year, now favoring just one hike, down from two before the decision.

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