NZIER Shadow Board backs an OCR hold as tightening risks build
The NZIER Monetary Policy Shadow Board is backing a steady official cash rate (OCR) at 2.25% this week, giving mortgage advisers a short period of relative certainty on mortgage rates and borrowing capacity before likely tightening.
“The NZIER Monetary Policy Shadow Board recommends the Reserve Bank of New Zealand (RBNZ) keep the official cash rate (OCR) at 2.25% in the upcoming Monetary Policy Review on 8 April 2026,” the NZIER board said.
Shadow Board members judge that holding the OCR is appropriate while the New Zealand economy is still recovering and the impact of the oil price shock linked to the US‑Israel war against Iran remains highly uncertain.
In a year’s time, the majority of members see the OCR between 2.5% and 3%, signalling an expectation that RBNZ will need to lift rates as second‑round inflation pressures build.
BNZ’s Stephen Toplis (pictured left) captures the uncertainty, saying “It’s impossible to say anything sensible at this stage other than that the spread of potential outcomes is one of the greatest that we have ever seen.”
“The Shadow Board viewed that RBNZ should take a data-dependent approach over the coming year, to gauge the impacts of the oil price shock on inflation and demand in the New Zealand economy,” the shadow board said.
For advisers, that combination of an OCR on hold now but with a clear upward bias suggests a limited opportunity for first-home buyers and property investors to secure current mortgage rates before a possible grind higher.
Kiwibank chief economist Jarrod Kerr (pictured center) argues that “Talks of rate hikes are overdone and premature. A supply shock should be ‘looked through’, and it’s the demand shock where we get worried,” warning that central banks will need “time, a lot of time, to gauge the impacts.”
Markets, economists, and inflation expectations
In the lead‑up to Wednesday’s OCR call, financial markets are assigning just a 4% chance to a hike this week, yet already have a 25 basis point rise priced in by September. That market view mirrors the Shadow Board’s expectation that the policy rate will need to move higher over the next 12 months.
Infometrics chief executive Brad Olsen said the Reserve Bank will not want to have a "knee jerk" reaction to the ongoing situation. Westpac’s Kelly Eckhold (pictured right) also stresses the balance RBNZ faces, noting that “Real interest rates are likely to be too low soon. Left too long, risks of entrenched inflation would rise once the war concerns recede,” but adding, “We have time to assess.”
Economists say the central bank is tipped to hold the OCR at 2.25% despite the conflict-driven surge in petrol prices and a weaker global outlook and expect RBNZ to reiterate its confidence that inflation will settle back within the 1–3% target band.
See the NZIER media release here.
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