Four New Zealand Banks Expect 25-Basis-Point Rate Hike to 3% on Wednesday
Key Facts
Four of New Zealand’s five largest banks expect the Reserve Bank of New Zealand to raise the official cash rate by 25 basis points to 3% on Wednesday, October 28, 2026, according to a report published by press.nz. Kiwibank disagrees, saying a hike is not necessary at this time. Still, the bank said raising the rate to 3% and then holding it would remain an acceptable option if the central bank chose that path. The expected decision follows a slowdown in annual inflation in the September quarter, but banks remain concerned about its outlook for the coming months. Attention is focused on how the bank will balance the latest inflation reading against the risk that price pressures persist.
The consumer price index rose 3.7% year over year in the September quarter, compared with 4.1% in the June quarter, and came in below the central bank’s forecast of 3.9%, according to the report. The decline indicates a slower pace of inflation between the two quarters, while the result was below the path forecast by the central bank. But some banks expect pressures to persist: ASB raised its forecast for annual inflation in the December quarter to 4.7% from its previous estimate of 4.5%. In its September Monetary Policy Statement, the central bank had forecast inflation of 3.9% in the December quarter. The gap between the recorded reading and year-end forecasts puts inflation at the center of the debate over the need for further monetary tightening.
ASB changed its forecast for the rate path and now expects cumulative increases of 75 basis points, with 25-basis-point moves in October, December and February, taking the official cash rate to a peak of 3.50%. That path includes two further increases after the expected October hike, one of them in February 2027. ANZ expects a rate hike on October 28, followed by a pause on December 9 and then two 25-basis-point increases in February and March, bringing the rate to 3.50%. The forecasts agree on a terminal level of 3.50%, but differ on the timing and number of intermediate increases before reaching it. The divergence underscores that most banks’ agreement on an October move does not mean they agree on the pace of subsequent tightening.
ASB expects most Monetary Policy Committee members to point to upside risks to the medium-term inflation outlook and keep their policy assessment conditional, with a tightening bias. That assessment suggests the committee’s discussion may focus on future risks even as recorded inflation slowed in the September quarter. In its published forecast, the bank said its December-quarter inflation projection was higher than the central bank’s forecast in its September statement. This combines a latest reading below the central bank’s forecast with concerns that inflation could rise again before year-end. The decision will therefore hinge on the committee’s assessment of the price path as much as on the size of the expected October increase.
The October 28 review is particularly significant in the policy cycle, but it is an interim review, and the central bank will not publish a full set of economic forecasts at that time. The full forecasts are due in the Monetary Policy Statement on December 9, 2026. The broader assessment of the inflation and interest-rate path will therefore come later, after the expected October decision. ANZ expects a pause in December, while ASB expects an increase that month, putting the next meeting in focus as well. The December statement is the next scheduled point at which the central bank will publish a full set of forecasts.