The Reserve Bank of New Zealand held its Official Cash Rate (OCR) unchanged at 3.25% during its July 2025 policy meeting, in line with market expectations and maintaining the lowest level since August 2022. The Monetary Policy Committee cited heightened uncertainty and near-term inflation risks as reasons to wait until August for further action. The annual inflation rate reached 2.5% in Q1 2025, remaining within the MPC’s 1–3% target range.
While it is expected to near the upper end of the band in Q2 and Q3, easing core inflation and spare capacity in the economy should help return it toward the 2% midpoint over time. Meanwhile, New Zealand’s economy contracted by 0.7% year-on-year in Q1 2025—slightly better than the expected 0.8% decline and an improvement from the 1.3% contraction in Q4 2024. Despite this modest recovery, the MPC expressed concern about the pace of the rebound, noting that ongoing uncertainty could prompt more cautious behavior from households and businesses.
