Reserve Bank of New Zealand press conference — 8 April 2026

What this says

Today, the Monetary Policy Committee agreed by consensus to hold the OCR at 2.25%.

Today's decision to hold the OCR rate balances the risk of reacting too early to near-term inflation that monetary policy cannot prevent with the benefits of responding preemptively to the risk of higher medium-term inflation.

Importantly, the committee is vigilant to any generalized medium-term inflation pressure and we stand ready to act decisively to return inflation to its 2% target midpoint over the medium term.

We currently project consumer prices to be 3% in the first quarter of this year and 4.2% in the second quarter.

Unemployment and job insecurity are also still at high levels and this dampen wage growth, but it also dampens medium-term inflation pressure.

we looked at preemptively trying to make sure that we don't see medium-term inflationary pressures against the risk of that dampening already weak economic growth.

oil prices falling today means, uh, that that, uh, inflation forecast of 4.2% for the second quarter could be on the higher side, but we've also seen a lot of volatility in oil prices. And if something happens, we could see oil prices staying above 100% and then, unfortunately, there's also upside risk to that forecast.

that is exactly what the 4.2% is based on. ... if that persists, that is on the higher side.

we were not close to to a rate hike today in any way.

there was consensus that we should hold the OCR at 2.25%.

near-term higher inflation somewhat weaker growth momentum

we're ready to act if we see that that means that it start being embedded in medium-term inflation outlook but we don't see that today

the future path for the OCR is very conditional on how the economy evolves

any signs that medium-term inflationary pressure are increasing and would be outside of the 2% target and we're looking at things like is this affecting if headline inflation is spilling over into core inflation we're looking at the medium and long-term inflation expectations and we're looking at wage growth cuz we know that they tend to be good predictor of a medium-term inflation.

So those are the things that are guiding us when we're looking at whether or not we would need to hike rates or not.

we will act to ensure that medium-term inflation returns to target and that will stop us from ending up in the risk of a stagflationary scenario.

Transcript

Good afternoon, everyone. Welcome to the Reserve Bank April Monetary Policy Review. I'm Anna Breman, Reserve Bank Governor and chair of our Monetary Policy Committee. I'm joined by fellow committee members Karen Silk and Paul Conway. Our other MPC members Hayley Gourley, Prasanna Guy, and Colleen Hansen are also online. Over the next few minutes, I'll share some slides and I'll talk you through today's decision and our assessment of the inflation outlook. We then look forward to answering your questions. Today, the Monetary Policy Committee agreed by consensus to hold the OCR at 2.25%. Since the February Monetary Policy Statement, events in the Middle East have materially altered the outlook and the balance of risk for inflation and economic growth in New Zealand. In the near term, inflation is expected to increase and the economic recovery to weaken. Today's decision to hold the OCR rate balances the risk of reacting too early to near-term inflation that monetary policy cannot prevent with the benefits of responding preemptively to the risk of higher medium-term inflation. Importantly, the committee is vigilant to any generalized medium-term inflation pressure and we stand ready to act decisively to return inflation to its 2% target midpoint over the medium term. Let me now turn to the basis for our decision. As you know, the conflict in the Middle East is leading to significant supply-side disruption in the global economy. The supply of oil, gas, and other petrochemicals such as fertilizers flowing from the Middle East has been significantly reduced. This is likely to lead to higher inflation and weaker growth, particularly in countries heavily dependent on Middle East oil and gas. And this includes many of New Zealand's trading partners in Asia. As you can see in this graph, the price of oil have increased substantially. Uh as of yesterday, market pricing is consistent with the price of oil falling over the coming quarters. However, oil prices are currently very volatile and today we've had an announcement of a cease-fire

cease-fire in the Middle East and that has uh caused the oil price to drop over the past few hours. If you turn to financial markets, um they have also been volatile over the past months. Globally, overall financial conditions have tightened and as you can see in this graph, wholesale interest rates have increased in many countries reflecting expectations of tighter monetary policy and this includes New Zealand. As you can see here, in New Zealand, uh mortgage mortgage rates have also increased and this reduces the further stimulus that we expected in February from borrowers refixing at lower interest rates. While financial conditions tightened overall, the New Zealand dollar has depreciated somewhat in trade-weighted terms, but this is also consistent with broader moves in currency markets.

So, let's turn to inflation in New Zealand. Oil and gas products are critical inputs for many sectors in New Zealand such as transport, agriculture, and packaging. So, higher oil prices and disruptions to global supply chains will mean higher near-term inflation. We have updated our forecast from February. We currently project consumer prices to be 3% in the first quarter of this year and 4.2% in the second quarter. Let me stress that the committee sees significant uncertainties around this forecast. Well, just to be very clear, this forecast is based on actual fuel prices and oil price futures as of yesterday and I showed you that graph just a second ago. As I mentioned, that assumes crude oil prices drop below 100 US dollar per barrel by the end of June. We also assume some near-term pass-through into other consumer price components, particularly transportation, air fare air fares, and to some extent also to food prices. But again, this forecast is highly uncertain and consumer prices in the second quarter could be both higher and lower than uh what we see in this forecast. We will update it at our next Monetary Policy Meeting in May. The Monetary Policy Committee's mandate is to look through near-term inflation volatility and ensure that inflation returns to the 2% target midpoint over the medium term. So, in this graph, you can also see core inflation and core inflation is a good guide to medium-term inflation pressures. And as you can see, prior to the conflict, measures of core inflation were stable albeit slightly above the 2% target midpoint. So, ensuring that inflation returns to 2% over the medium term, it will require three things: that core inflation remains contained, that wage growth is modest, and that medium and long-term inflation expectations stay around 2%. And importantly, this will depend on the outlook for the labor market and for growth. So, let us turn to the outlook for the labor market and growth. As you know, prior to the conflict, the New Zealand economy was in the early stages of an economic recovery. GDP growth in the December 25 quarter was 0.2%. That was somewhat lower than we expected, but high-frequency indicators

over January and February suggested that the recovery was actually gaining strength. In this graph, you see the GDP uh the Kiwi GDP now forecast and that was actually 0.6% currently for the first quarter. Looking forward, higher fuel cost and rising uncertainty are expected to weaken the economic recovery in the near term and I would like to acknowledge that this is challenging time for many New Zealand households and businesses. Spare capacity is now likely to persist for longer, dampening the ability of firms to pass on cost increases through higher prices and that will then dampen inflation over the medium term. Unemployment and job insecurity are also still at high levels and this dampen wage growth, but it also dampens medium-term inflation pressure. Given the recency of the conflict, we currently don't have much data on the likely persistence of higher near-term inflation or how much we expect uh the reduction in economic growth to be in the near term. But what we do have, such as the business outlook survey that you can see now on this slide, it's consistent with near-term inflation expectation increasing. You see that in uh the blue line, um but also with uh business sentiment falling uh over the recent week. And if you see the two dots here, the blue and the red dot, that's the last reading from the end of March. Uh in addition to this, we've done our own business surveys and we have an engagement with businesses around the country and that confirmed this view with higher inflation expectations for the near term and somewhat weaker growth. Uh at our May Monetary Policy Meeting, so next Monetary Policy Meeting, we will have a full set of forecast and more data indicating where uh inflation and the economy is heading.

So, before we take question, let me recap. Today, uh the Monetary Policy Committee has agreed by consensus to leave the OCR on hold at 2.25%. We remain vigilant to any generalized inflationary pressure and we continue to monitor the economic recovery. We stand ready to act decisively to return inflation to 2% over the medium term. We now look forward to taking your questions. Thank you, Governor. Um and thank you to the journalists on our Zoom call. Um I could just ask you to please raise your hand and we'll turn to you shortly. Um first up, we'll go to Lucy from Reuters. Oh, hold on. Can you hear me? Yes. Okay, great. Sorry. Um so, first of all, you talked about um number of committee members discussing um pre-emptive um ly increasing the cash rate. When they discussed pre-emptive, was there a decision uh or a discussion around uh increasing the cash rate today or was it pre-emptive as in you want to increase it next month? What sort of time frame is that pre-emptive in? No, so uh in the record of the meetings, uh there is a um discussion on different options that we were discussing uh including whether we should act relatively early because we think that there could be higher medium-term uh higher medium-term inflationary pressures and some committee members stressed that if we do a rate hike in the near near term, uh, like today's meeting, May or July or so, uh, that might mean that we don't have to do so many rate hikes going forward, but we also at the same time discussed the risk that that could dampen the weak economic growth, uh, that we're already seeing in the near term. So, when we say that we balance these things, that is what we mean. We looked at preemptively trying to make sure that we don't see medium-term inflationary pressures against the risk of that dampening already weak economic growth. So, it was discussed the possibility of increasing the cash rate today. Uh, yes, it was a discussion. Um, and secondly, we've had news of a ceasefire today. What does that mean for

your inflation outlook and is inflation already baked in or will this change your sort of forecast from today, um, if if the ceasefire sticks? Yeah. So, we knew that, uh, we would get more information because there was a deadline announced for today. So, we knew that the inflation forecast, in particular for the second quarter, was highly uncertain. Uh, oil prices falling today means, uh, that that, uh, inflation forecast of 4.2% for the second quarter could be on the higher side, but we've also seen a lot of volatility in oil prices. And if something happens, we could see oil prices staying above 100% and then, unfortunately, there's also upside risk to that forecast. But if this persists and then oil prices now fall, uh, faster than the future prices were indicating, then that that forecast is actually on the higher side. That's correct. Thank you. Thank you. We'll now head to Zane Small from Three News. Uh, Kia ora, Governor. Um, you did touch on it there, but my question to you is you forecast 4.2% inflation rate in the June quarter and I'm wondering if that is a conservative estimate or about as high as you think it could go. No, so we try to be very clear on which assumptions we make uh, to come up with that number. And it's really that we use that, uh, the current oil price and what that means for fuel prices in New Zealand and the future prices as of yesterday. So, as of yesterday, assuming that uh, outlook for oil prices and what that means for fuel prices in New Zealand and also assuming that some of that will be passed on to higher transportation costs, airfares and to a little extent also to food prices. That is exactly what the 4.2% is based on. But as we've seen today, today oil prices fell quicker than the future market price. So, if that persists, that is on the higher side. On the other hand, if oil prices rebound and go up to a higher level again, then it's it's, uh, on the low side. And that's why we stressed that there is a lot of uncertainty with that forecast. And does that take into account that

consumers may be spending a lot less because prices are so much higher? So, uh, we don't take into We don't do um, any reweighting of the CPI weights. So, this is a little bit technical because the CPI weights don't change. So, even if households consume less, uh, fuel in the near term and drive their cars less and there is some data that points to that, that will not be accounted for in the official CPI numbers. Um, and it doesn't take into account that they there might be a downward pressure on other prices if household consume less of other goods and services. That's not taken into account in that number. So, while while that talks to the near term, what you would expect to see that if you have conditions like that, uh, consumer confidence is down, uh, the economy is weaker, that would flow into the medium-term inflation numbers and it would have a dampening effect on inflation over the medium term. Thanks. We'll now head to Ainslie Thomson from Bloomberg. Hello. Um, with your visits to businesses, have you had any intelligence of changes in price-setting behavior? Well, that's a very important question. So, uh, we've done both business surveys and we also met a number of, uh, businesses around the country. Uh, this is anecdotal data, so I want to be a little bit careful. Uh, the main things that we hear is that quite a number of businesses are planning on hiking their prices. Some are saying that they will use temporary fuel surcharges. That means that those prices could be reverted if we see if fuel prices coming back down. Some are saying that they will just hike their prices and some say that they cannot hike prices even if this year their costs go up because consumers are not accepting higher prices. So, we see a range of different answers from different companies and this is kind of thing where we get more data and better information over the coming months. Okay. Okay. Thanks. We'll now head to Jason Walls from One News. Um, thank you very much for the

opportunity and I'd like to commend you on doing these, um, um, online, um, press conferences as well. I think it's a really good move towards transparency. My question is about house prices and just what your forecasts are about where, um, what's happening with house prices, um, at the moment and going forward. Uh, so that's a good question. Uh, so we don't have a new house price forecast, uh, right now, but we'll come back to that in the May meeting. In February, we still expected a little bit of higher house prices this year. Uh, what we do know is that it differs across different parts of the country. Uh, and in May again, we'll have better data to comment on the the recent developments. Uh, but we don't have a new update today. Can I can I just add to that? Of course. Like we haven't we're not publishing a full set of projections. Uh, because this is a monetary policy review. Uh, when we put out a monetary policy statement, which is four times a year, we do publish, uh, a full set of projections including for house prices. But this time uh, we, you know, did something a little unusual in that we put out forecasts for, um, CPI inflation in Q1 and Q2, uh, this year just given given the interest and how sort of relevant it is to the current economic conversation. Yes. But it's not a normal thing for us to do to put numbers like that out at an MPR. Thank you. We'll move to Bernard Hickey from the Kaka.

Bernard, you're on mute. Thank you very much, Governor. Um, could you firstly talk about uh, how close, um, the committee got to a hike today given you've said it was considered. And also, um, if, uh, there are forecasts there, uh, about the potential path for the official cash rate and whether it was in line with or above or below where financial markets are currently forecasting, which is two rate hikes before the end of the year. Yeah. So, thank you for giving me the opportunity to clarify that. So, we were not close to to a rate hike today in any way. Uh, we discussed the possibility of whether a relatively early rate hike could mean that we needed to do fewer rate hikes if we saw risk to medium-term inflation being higher. Uh, but, uh, there was definitely no, uh, discussion or strong advocates for hiking at today's meeting. On the contrary, there was consensus that we should hold the OCR at 2.25%. Uh, we don't present an OCR track at today's meeting. We don't usually do that when we have a monetary policy review. Uh, so we'll get back to that at our next meeting in May. And exactly like Paul Conway pointed out, that's when we have a full set of forecast as we usually do at the monetary policy statements. So, you didn't have a, um, a little OCR track, um, somewhere deep in the, um, spreadsheet, uh, that you were keeping an eye on? Can we like we do we do have a set of projections that we do that we run internally for MPR to to sort of, I don't know, anchor the conversation. Um, but we don't, uh, publish those, uh, externally because, you know, they're it's a sort of working set of projections and to get it from there to something that we'd be comfortable publishing would take, you know, rounds and iterations so that the committee owns it. Uh, and we basically don't have time, uh, to do that for a for an MPR. But we we have that in front of us as committee members. And you don't have a full set of data to inform the data. Exactly. Exactly. Yeah. um, um, financial market conditions have tightened as you mentioned in your, um, statement with the decision. Are you okay with that given that, um,

you know, we're seeing, uh, people, um, reducing tracking schedules and, uh, it's quite it's been quite a hit to confidence. No, but it's it's a very good question. So, so we did note, uh, that financial conditions have tightened and that has also been translated into higher mortgage rate not as much as wholesale interest rate has gone up and as I did point out here that means that the OCR cuts that have been done we expected that to provide a little bit more stimulus this year when households were re-fixing their mortgages so overall that is a little bit tighter financial conditions and that's likely to dampen somewhat near-term economic growth it's about 20 basis points up on the mortgage interest rate for households. We also know that the deposit rates have not gone up as much as the mortgage rates. So so in a way it's it's helped you do some of your work. Look at those rate movements as the governor said are a reflection of movements in the wholesale rates and that's an interpretation of the disruption we've seen already and the increase in prices we've already seen in terms of oil products and byproducts from that and the reflection that at least in the near term that poses upside risk from an inflation perspective so whether it goes further than that is largely dependent on what happens in terms of the duration of the disruption from here so we've already talked about there being significant uncertainty around what will happen from here and we would expect to have more clarity over the coming weeks which will allow us to put a more fully informed set of forecasts out and an OCR track with that. Thank you. Thanks Bernard. We'll now head to Janine from the New Zealand Herald. Hello. Bernard sort of touched on the the the question I had and that was about how much of a bearing did the tighter financial

conditions have on the committee's decision today? Well we did note that financial conditions have tightened so we did take that into account at today's decision but again we're looking out over the medium term so our decision is really based on where we see the economy and inflation heading over the medium term and right now we see near-term higher inflation somewhat weaker growth momentum in the near term and we're ready to act if we see that that means that it start being embedded in medium-term inflation outlook but we don't see that today and we decided with full consensus to hold the OCR at today's decision. Thanks Janine. We'll now head to Jonathan Milne from Newsroom.

Try that again. I'm Jonathan Milne from Auckland thank you for the opportunity to jump in from Auckland. The there's been criticism of the MB fuel supply data and Stats NZ says admitted botching its FPI data in February and has now said that it's looking to improve some of its data collection that survey data collection. How satisfied are you with the quality of the statistical information that that you're getting in order to make your decisions? Well we are happy with the statistical information that we are getting we also know that there has been some additional money to improve the Statistics New Zealand data and we welcome that. We are always and it's always difficult in these circumstances when there is a lot of uncertainty it takes quite a long time before we get the official statistics so we're also stressing right now that we're looking very carefully at high frequency data we're trying to be more active in terms of engaging with businesses reaching out and doing business services etc. But um it's the way that it is when there's so much uncertainty in the global environment that we're all struggling in terms of getting access to the official data on time but we're happy with the data that we do have when we get it. Is it up to international standards? I believe it is yes. Thank you. Thank you enough. If I could just remind our journalists on the call if they could raise their hand and if they want to ask a question or an additional question we'll now turn to Lucy at Reuters. Hi you said that you were looking at raising rates gradually or could look at raising rates gradually. Do you want to just give us an idea of what gradually looks like and where you think neutral the neutral rate is as of today? So we have said previously that we believe that a neutral rate is it's a it's a range with a midpoint closer to 3% and gradual means moving in normal step which is usually

0.25% but it could be at one meeting it could be every second meeting it will depend on the outlook for inflation and economic growth and how the labor market evolves. I don't know if Karen and Paul would like to add something on the neutral >> I I I'd just like to say you know with the world being in such a state of flux currently and things moving so quickly you know as the governor mentioned you know with swings in oil prices today you know I think I think the message that we're putting out in this MPR is it's the future path for the OCR is very conditional on how the economy evolves and we've basically put out a framework for how we're thinking about near-term inflationary pressures and the extent to which they spill over into medium-term inflationary pressures which is our target and the extent to which that will be offset by a weaker growth environment in New Zealand you know that will very much condition the rate track going forward but it is it is conditional there are unknowns in there and you know as as as Karen and the governor have said we're getting more information all the time that will make it less conditional in the first instance for our for our MPS. Thank you. Thanks. We'll return to Ainslie from Bloomberg. Thank you. As Bernard said the markets are pricing in two rate hikes in the second half is that in line with your current thinking? Well as I mentioned we don't have a new OCR track so what we're saying and we're trying to be very clear which Paul described really nicely is the kind of information that we're looking for over the coming months so we're looking at do we see any signs that medium-term inflationary pressure are increasing and would be outside of the 2% target and we're looking at things like is this affecting if headline inflation is spilling over into core inflation we're looking at the medium and long-term inflation expectations and we're looking at wage growth cuz we know that they tend to be good predictor of a medium-term inflation. So those are the things that

are guiding us when we're looking at whether or not we would need to hike rates or not. Thanks Ainslie. Now we'll head to Daniel O'Leary from Market News International. Hi thank you. I'm just wondering about the the risk of stagflation developing this year and what that could mean for the bank's strategy. It's a little bit hard to hear could you repeat it? >> of stagflation? Yeah stagflation risks. Yes so our our mandate is to make sure that medium-term inflation is close to target so what we're saying today is and I already just mentioned the things we are looking at but we will act to ensure that medium-term inflation returns to target and that will stop us from ending up in the risk of a stagflationary scenario.

Thanks everyone for the questions just a reminder you can raise your hand if you'd like to ask a question. Do we have any questions for the panel?

I think that might be it so we'll pass back to you governor. Thanks everyone. >> Thank you. So thank you everyone for your questions and for joining us today. We intend to make this online media conference a standard feature after the monetary policy review but we are open to evolving our approach and we welcome your feedback. But again thank you so much for joining us today.

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