RBNZ set for second straight rate hike, say 90% of economists in poll

With 27 out of 31 economists predicting a September rate increase, the decision itself is not a surprise. Attention will instead be on the pace and scale of further tightening. The range of forecasts for end-2027 is wide, from 2.50% to 4.00%, indicating genuine uncertainty about the cycle's endpoint. Westpac and BNZ sit at the hawkish end, expecting 4.00%, while ANZ takes a more moderate view at 3.00%. The housing market has been softer than anticipated, with prices broadly flat this year, which could offset some inflation pressures. However, signs of economic recovery, including expected growth in the current quarter, give the RBNZ room to keep tightening without an immediate growth constraint.

---

Earlier coverage:

• BNZ preview: Inflation and growth strength point to further RBNZ tightening

---

A large majority of economists anticipate the RBNZ will continue raising rates until the end of the year, but opinions differ markedly on the cycle's final peak.

Key points:

• In a Reuters poll, 27 out of 31 economists predict the RBNZ will lift the OCR by 25 basis points to 2.75% on September 2, marking the second straight increase.
• Two-thirds of the forecasters (20 of 30) anticipate at least one more rate increase in the next quarter, and the median forecast for year-end is 3%.
• Inflation hit a 2.5-year high of 4.1% last quarter, and economists do not see it falling back within the 1%-3% target this year, partly because of energy price pressures.
• The neutral rate for New Zealand is typically estimated at 3.00% to 3.25%. One analyst cited discomfort with rates being so far below neutral as the primary reason for continued hikes.
• Predictions for end-2027 span from 2.50% to 4.00%, with a median of 3.00%. Westpac and BNZ forecast 4.00%, Kiwibank and ASB see 3.25%, and ANZ expects 3.00%.
• The economy appears to be recovering, with a likely contraction of 0.1% last quarter followed by an expected 0.4% growth this quarter, which gives the RBNZ scope to continue tightening.
• A separate Reuters poll of property analysts indicates home prices will be broadly flat this year before increasing 3% in 2027.

According to a Reuters poll, a strong majority of economists expect the Reserve Bank of New Zealand to raise interest rates for the second straight meeting on Wednesday. Further tightening is anticipated next quarter as inflation remains elevated. The poll, conducted from August 20 to 27, found that about 90% of economists (27 of 31) expect the RBNZ to increase the official cash rate by 25 basis points to 2.75% on September 2.

At its last meeting, the central bank raised rates for the first time in over three years and signaled further tightening to bring inflation back to the 1%-3% target. Since then, official data showed inflation reached a two-and-a-half-year high of 4.1% in the latest quarter. Economists do not expect inflation to return to target this year, partly due to upward pressure from energy prices.

One analyst in the poll stated that the reason for further hikes is simple: inflation is above target and the RBNZ is uneasy with rates being so far below neutral. New Zealand's neutral rate, which neither stimulates nor restricts growth, is generally estimated at 3.00% to 3.25%.

Two-thirds of the economists (20 of 30) expect the RBNZ to hike at least 25 basis points next quarter, with a median year-end forecast of 3.00%. Higher borrowing costs are likely to weigh on the housing market. A separate Reuters poll of property analysts sees home prices broadly flat this year, lagging inflation, before a 3% increase in 2027.

The wider economy is showing cautious signs of recovery. After a likely contraction of 0.1% in the prior quarter, growth of 0.4% is forecast for the current quarter, according to a separate Reuters poll. This could give the central bank more room to keep raising rates without an immediate drag on activity.

Among economists who provided forecasts through end-2027, there was no clear consensus. Projections ranged from 2.50% to 4.00%, with a median of 3.00%. Several major New Zealand banks held more hawkish views than the panel overall. Westpac and BNZ both expect the cash rate to hit 4.00% by end-2027, while Kiwibank and ASB project 3.25% and ANZ expects 3.00%. One analyst summarized the uncertainty, saying the eventual peak—which they estimate at around 3.25%—would depend on whether spare capacity in the economy or ongoing cost increases dominate the medium-term inflation outlook.

The RBNZ governor is Breman.