RBNZ Governor Anna Breman indicated that persistently higher oil prices are expected to drive near-term inflation above the levels assumed in the Bank's September Monetary Policy Statement. However, she noted that the RBNZ is not yet committing to a specific policy response, aiming to maintain optionality ahead of its October decision.
Breman emphasized that significant risks to the economic outlook persist, and while the recovery is continuing in the current quarter, it remains uneven. The RBNZ expects the economic recovery to strengthen and broaden over time. The Bank will assess incoming data and global developments before its October 28 decision, with a continued focus on the inflation outlook.
Markets had largely priced in a pause at the October meeting following September's 25 basis point hike to 2.75%. Breman's remarks on oil prices as an upside inflation risk are considered a mildly hawkish data point, but her parallel emphasis on an uneven economy suggests this is not a clear signal for immediate tightening. The explicit reference to oil keeps energy prices as a key factor for the RBNZ's future assessments.
Some analysts, such as those from ING, view the RBNZ's September meeting as having a "dovish surprise," signaling limited room for further rate hikes to 3.0%. However, they also caution that this guidance is not a commitment and that elevated energy prices could lead to upward revisions in policy projections by year-end. Overall, the market is pricing in about a 75% chance of two additional OCR hikes this year, with the peak in the cycle around 3.75%.
