RBNZ surprise hold at 2.75% splits the committee 4-3 and sinks the kiwi

New Zealand's central bank caught nearly everyone off guard on Wednesday. The RBNZ surprise hold left the official cash rate at 2.75% after a 4-3 vote, even though economists and markets had lined up behind a quarter-point increase to 3%.

What happened

Governor Anna Breman, Carl Hansen, Prasanna Gai and Rebecca Williams voted to keep the rate where it is, while Paul Conway, Hayley Gourley and Karen Silk wanted a 25 basis point rise, according to the bank's statement as published by interest.co.nz. The majority argued that the July and September increases gave the committee room to take more time to assess their effect.

The inflation picture is still uncomfortable. Annual CPI inflation was 3.7% in the September quarter, down from 4.1% in June and lower than expected, but the bank now expects 4.4% in the December quarter, largely because of fuel futures prices. Core measures have climbed to around the top of the 1% to 3% target band, and the exchange rate has fallen by about 3% since early September.

A Reuters poll cited by CNBC had 22 of 27 economists forecasting a hike. The kiwi fell by up to 1.7% in the minutes that followed, touching $0.5585.

Why it matters

ANZ chief economist Sharon Zollner told RNZ it was "a close-run thing" and that a hike would have been the most prudent course. Infometrics' Brad Olsen called the tone "decidedly dovish," with much of the meeting summary devoted to risks to the recovery and to a global outlook the bank described as increasingly fragile. Some traders looked at the calendar instead. "The election is only 10 days away," Mike Houlahan of Electus Financial told Reuters, though RNZ noted the bank has no requirement to weigh politics.

The RBNZ surprise hold also costs our Record a point. Our Oct. 26 call that the bank would raise rates by 25 basis points this month, explained in our RBNZ rate hike preview, is a miss. It lands as other central banks also lean toward waiting, including the widely expected ECB October hold on Thursday.

What's next

All seven members said tighter policy will probably be needed, though that depends on how the outlook develops. Zollner now sees a December increase and an OCR of 3.5% after further moves in February and March; ASB and Westpac also pencilled in a December rise, and RNZ said financial markets put a 75% chance on it. The full statement behind the RBNZ surprise hold is on the Reserve Bank's website.

The call

We say the RBNZ will raise the OCR by 25 basis points at its December 9 meeting. Polymarket's "Reserve Bank of New Zealand increases interest rates by 25 bps at the December 2026 meeting?" market priced Yes at 60% at 08:22 MSK on Oct. 28, below the roughly 75% that RNZ said markets imply. Three members already voted to hike this week and the whole committee expects tighter policy. Liquidity in this Polymarket contract is thin.