Our take on the latest Monetary policy review (Wed 17 Aug 2022)
OCR increased by 50 basis points to 3.0%
Inflation to remain above 3.0%pa until mid-2024, nearly a year later than last forecast
We expect two more 0.50% increases by the end of 2022
The key numbers...
- The Reserve Bank has announced a fourth consecutive 50 basis point increase to the official cash rate (OCR), lifting it to 3.0%.
- In the August Monetary Policy Statement, the Bank revised up its expectations for the OCR over the next three years, with a peak of 4.1% (on a quarterly average basis), implying two additional 50 basis point increases in 2022, and a little more possible in 2023 if needed.
- Inflation is set to remain higher for longer, taking until mid-2024 to get below 3.0%pa, compared to an expectation in May that inflation would be back at that level by September 2023.
- The Bank revised down its forecast for house prices, with an expected further fall of 11% between the June 2022 and September 2023 quarters.
Higher expectations for official cash rate
Official cash rate, RBNZ estimates, quarterly averages
...and our reaction
- The Bank took a stronger stance on inflation and the need to remain “resolute” to combat more persistent pricing pressures. The increased concern over inflation was driven by the tight labour market and a broadening in inflation recently.
- The Monetary Policy Committee seriously considered a more aggressive pace of increases (a 75-basis point raise) to increase the credibility of the Bank to get inflation back under control, but ultimately decided to continue with a 50-basis point increase.
- The Bank’s view is that the domestic economy is much stronger and more resilient than many might expect given the challenges emerging. That tone of high domestic activity reinforces views that further raises are needed to actually achieve a lower temperature for the economy, with strong increases over the rest of 2022. But we do wonder if there’s scope for the Bank to pause and assess things over the extended summer break.
Latest updates
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Monetary policy review
OCR up for first time in three years, as expected
Wed 8 Jul 2026
2.5% Official cash rate from 2.25%
Inflation now expected by the Bank to peak at 3.9%pa
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Monetary policy review
Split decision keeps OCR at 2.25% for now
Wed 27 May 2026
2.25% Official cash rate unchangedCasting vote made by Governor with a 3-3 vote split among Committee membersRBNZ forecast OCR to reach 3% by end of 2026Monetary policy review
Reserve Bank holds at 2.25%, but watches vigilantly
Wed 8 Apr 2026
2.25% Official cash rate unchangedBank places more emphasis on potential inflationary risks4.2% Annual inflation forecast to accelerate by June this yearMonetary policy review
OCR on hold, but set to lift slightly quicker
Wed 18 Feb 2026
2.25% Official cash rate (OCR) unchangedDec-26 qtr First OCR rise now expected a quarter earlier than last MPS
Sep or Oct Financial markets picking for the first increase