28/10/2026
Commentary from our fav NZ Economist:
Applause for the pause, as the RBNZ keeps cash at 2.75%.
The RBNZ decided to hold the cash rate at 2.75%. Great, we certainly applaud the pause. They have delivered two hikes, and want to look around. They are on a fact finding mission (data dependent). And their decision clearly lowers the highly inflated expected path for interest rates from here. We, along with most commentators and market traders, had expected a hike today. Although we remain firmly in the most dovish camp, expecting far fewer hikes compared to the consensus of economists looking for moves towards 4% and above. A move to 3-to-3.25% is still likely. But market pricing of 4% needs to be unwound. That will lower wholesale rates, and lower the pressure on all retail rates, particularly mortgage rates. This is good news for Kiwi households and businesses. It’s precisely the ‘time to assess’ we have been fiercely arguing for.
The commentary in the statement and press conference was nicely balanced. Every upside risk was counterbalanced with a downside risk. And that’s important. There is simply a lot of uncertainty, both here and abroad, and the economy is struggling to recover. The RBNZ Monetary Policy committee was split 4-3 in favour of a pause. So there are upside and downside risks, interpreted differently by the members.
We continue to expect a move to 3%, as outlined in the RBNZ’s September statement, followed by another pause. A move to 3.25% is still on the cards next year. But a move to 4% is not, in our opinion.
