RBNZ Governor Breman used her casting vote to maintain the OCR at 2.25% today. The 3 external MPC members all voted for a 25bp hike while the 3 Bank staff voted for a hold.
The disagreement was about the timing of policy tightening.
The Governor and the Monetary Policy Statement (MPS) made it clear that the MPC expects to increase the OCR at coming meetings.
The OCR track was lifted as expected and the policy rate is now projected to reach the 3% central estimate of long-run ‘neutral’ by early 2027. There are 3 more MPC meetings this year and an additional 2 meetings by March 2027.
The external MPC members seemingly sided with Prasanna Gai’s view - espoused recently here - that pre-emptive policy tightening is warranted when “a hub shock raises prices, coordinates beliefs, and may embed itself in the inflation process through the very act of firms trying to assess whether it will”.
