RBNZ rate hike to 3% expected as oil and weak kiwi lift prices
New Zealand's central bank is widely expected to lift its cash rate a quarter point to 3% on Wednesday, its third straight increase, ten days before a general election.
An RBNZ rate hike on Wednesday, Oct. 28, is now the consensus call. The Reserve Bank of New Zealand is expected to lift the Official Cash Rate a quarter point to 3%, its third increase in a row after moves in July and September, with markets pricing about a 90% chance, according to an investingLive preview.
What happened
Only weeks ago a pause looked likely. When the bank lifted the rate to 2.75% in September, it pushed back against a long tightening cycle and projected the next move in December or early 2027, with a peak of 3.25% in 2028 or 2029, ING noted. Since then, oil prices have risen about 20%, the trade-weighted kiwi dollar fell 4% in September to its lowest since 2009, and second-quarter growth came in at 2.6% year on year against the bank's 2.1% estimate.
Headline inflation actually cooled to 3.7% in the September quarter, below the bank's 3.9% forecast, but economists called it a "temporary reprieve." Petrol prices rose 19.1% over the year, and 54.9% of the consumer price basket rose by more than 3%, up from 38.5% a quarter earlier, interest.co.nz reported. ASB expects annual inflation of 4.7% in the December quarter, well above the 1% to 3% target band.
Chief Economist Paul Conway's remarks on Oct. 15 helped lock in expectations for an October move, according to ING.
Why it matters
The decision lands ten days before New Zealand's Nov. 7 election, which makes the guidance politically sensitive. Markets see a peak near 3.5% by February, and Westpac thinks the cash rate could reach 4% by September 2027, investingLive said. ING expects one more increase in December or February and puts the terminal rate at 3.25% to 3.5%.
An RBNZ rate hike would add New Zealand to the club of central banks fighting an energy-driven inflation scare. The Reserve Bank of Australia lifted its rate to 4.6% in September and is expected to move again on Nov. 3, and the RBA's Hunter said over the weekend that the inflation job is not done after four hikes, investingLive reported. Similar pressures drove the Reserve Bank of India's hike and fueled bets on the Bank of England after UK inflation hit 3.5%.
What's next
The announcement is due at 01:00 GMT on Wednesday. Because the move is almost fully priced, the kiwi is likely to react to the tone: a hold would catch markets offside, while a hike with a clear tightening bias would support the currency, ASB and investingLive said. ING's full reasoning is in its RBNZ preview.
The call
We say the Reserve Bank of New Zealand will raise the Official Cash Rate by 25 basis points at its Oct. 28 meeting. Polymarket's "Reserve Bank of New Zealand increases interest rates by 25 bps at the October 2026 meeting?" market priced Yes at 92% at 08:24 MSK on Oct. 26. With oil higher, the kiwi weak and the bank's chief economist sounding hawkish, an RBNZ rate hike is the path of least resistance.
This article is for information only and is not investment advice. Calls are editorial forecasts, logged with market odds at the time of publication and kept on the record.