New Zealand Watch: RBNZ preview: The waiting game

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New Zealand Watch: RBNZ preview: The waiting game

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New Zealand Watch

RBNZ preview: The waiting game

RBNZ on hold, but ready to act 22 May 2026

We expect the RBNZ to hold at 2.25% on 27 May, with the OCR track revised higher in Economics

the near-term to reflect upside inflation risks, but with their terminal around 3.2% well Australasia

below hawkish market pricing (Exhibit 1). Since the MPC last met, 1Q core inflation Economics

eased, April SPI was soft, medium-run expectations remain anchored, and wage Nick Stenner, CFA

pressures remain subdued. However, headline inflation rose to 3.1% in 1Q and will rise Australia & NZ Economist Merrill Lynch (Australia)

further in 2Q. Consequently, the RBNZ will likely take a wait-and-see approach but +61 2 9226 5031

discuss the case for pre-emptive hikes to send a strong message on inflation and nick.stenner@bofa.com

manage expectations. JohnnyAustraliaLiu,& NZCFAEconomist

Merrill Lynch (Australia)

Demand destruction to weigh on medium-term inflation johnny.liu2@bofa.com

The NZ economy was in the early stages of a recovery when the stagflationary shock hit. FX and Rates Strategy Oliver Levingston

It is too early to assess the persistence of the inflation impulse, or magnitude of the FX and Rates Strategist

downside growth hit, but timely data suggest GDP will likely contract in 2Q. The RBNZ’s Merrilloliver.levingston@bofa.comLynch (Hong Kong)

Feb MPS expected GDP growth of 1.6% over 1H 26, but it is likely to be closer to 0.4%, Isabel Hartstein

so the RBNZ’s estimated output gap will likely be revised further into negative territory. FX & Rates Strategist

Sentiment-based activity indicators suggest a sharp pullback in growth, house prices fell isabel.hartstein@bofa.com