New Zealand Institute of Economic Research (Inc)
Media Release, 10 am Monday, 7 July 2025
For immediate release
A majority of members in the NZIER Monetary Policy Shadow Board recommend that the Reserve Bank of New Zealand (RBNZ) keep the OCR on hold at 3.25 percent in the upcoming July Monetary Policy Review. While activity remains soft in the New Zealand economy, there are both upside and downside risks to inflation in the near term, given the recent pick-up in annual CPI inflation and heightened global risks. Considering these factors, several members viewed it appropriate for the RBNZ to pause cutting the OCR in July.
Regarding where the OCR should be in a year’s time, members’ picks of the OCR centred on a range between 2.75 percent and 3.25 percent. This reflects the Shadow Board’s broad view that the monetary policy easing cycle is approaching its end over the coming year, and that the RBNZ continuing to apply a wait-and-see approach beyond July would be appropriate. Several members saw little scope for further OCR cuts over the coming year, given the increased ambiguity over New Zealand’s economic and inflation outlook, especially the potential inflationary impact of heightened global uncertainties. However, two members considered further OCR cuts are needed to support recovery in the New Zealand economy.
Table 1 Participant comments
Participants’ comments are optional
| Stephen Toplis | Further monetary easing is probably needed to ensure the output gap closes and medium-term inflationary pressures settle near the mid-point of the RBNZ’s target band. That said, it will be difficult for the RBNZ to cut in July given current market pricing and the RBNZ’s May neutral bias. |
| Viv Hall | The combination of ongoing global uncertainty, little evidence of further downward movement in inflation expectations, and only modest recent easing in cost pressures and pricing intentions, is such that there is no strong case for downwards or upwards movements in the OCR for some time yet. |
| John Pask | Given very mixed data at present on the state of the economy, in particular, the upside and downside risks to inflation (principally due to geopolitical risks), there is a strong argument for the Reserve Bank to sit on its hands until there is more clarity. |
| Jarrod Kerr | Our exporters are doing well. But they are exposed to global risks. Our economy still needs support, especially in the interest rate sensitive parts. The push-higher in inflation should prove temporary. And the medium-term risks for inflation are to the downside. Most of the move in interest rates towards a neutral setting has happened. A little more is required to reinforce a recovery. |
| Arthur Grimes | No comment. |
| Kelly Eckhold | There are signs of stronger commodity prices and low interest rates supporting activity. These factors will likely prove enduring once more transitory global uncertainties recede. Inflation seems likely to hug the top of the target range this year, limiting the need for further stimulus. |
| Dennis Wesselbaum | Since the last review, there have been a few significant changes. Inflation and inflation expectations continue to trend upward, GDP growth remains subdued, and both unemployment and jobseeker support have increased. Considerable uncertainty and ambiguity persist in trade. On balance, current conditions warrant a pause on further rate cuts. |
| Kerry Gupwell | On balance, I believe there should be a further rate cut of 25 basis points. While there are signs of an economic recovery, it’s been slow and lumpy, and there are heightened geopolitical risks. |
| Brooke Roberts | The RBNZ may hold the OCR, given the headline inflation is at 2.5% and core inflation is easing, alongside a cautious split vote in May. However, a 25 basis-point cut is possible as unemployment rose to 5.1% in Q4 2024 and domestic demand weakened, suggesting signs of growing slack and easing inflationary pressure. |
About the NZIER Monetary Policy Shadow Board
NZIER’s Monetary Policy Shadow Board is independent of the Reserve Bank of New Zealand. Individuals’ views are their own, not those of their respective organisations. The next Shadow Board release will be Monday, 18 August 2025, ahead of the RBNZ’s Monetary Policy Review. Past releases are available from the NZIER website: www.nzier.org.nz.
Shadow Board participants put a percentage preference on each policy action. Combined, the average of these preferences forms a Shadow Board view ahead of each monetary policy decision.
The NZIER Monetary Policy Shadow Board aims to:
• encourage informed debate on each interest rate decision
• help inform how a Board structure might operate
• explore how Board members could use probabilities to express uncertainty.
For further information, please contact:
Ting Huang, Senior Economist
ting.huang@nzier.org.nz, 027 266 0969
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