One vote, two perspectives: Behind the Reserve Bank’s OCR split
Friday, 29 May 2026
Debate within the Reserve Bank’s monetary policy committee on whether to raise the Official Cash Rate this week was “rigorous and robust”.
But it was “very professional” and not heated, says Hayley Gourley, one of the three external members whose views were overridden in an unprecedented split.
Meanwhile, the bank’s chief economist, Paul Conway, has told The Post it was “happen-stance” that the three external members took one view and the bank’s three employees on the committee all took another.
The committee was divided equally on Wednesday on whether to raise the OCR, with Conway, Reserve Bank assistant governor Karen Silk and governor Anna Breman — who used her casting vote to break the deadlock — voting to hold the rate at 2.25%.
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The way the committee split has raised eyebrows, given the chances of a 3:3 vote breaking cleanly between the external members and the bank’s employees would only be 10% if views were assigned to each member at random.
Conway did not reject the notion that the divide could also raise the stakes for the bank if it proved in retrospect that the decision was a mistake.
BNZ research head Stephen Toplis forecast before the monetary policy statement that the bank would either be accused of “tightening too quickly and blamed for clobbering the economy, or charged with tightening too late and being at fault for any resulting inflation”.
But anyone itching to argue the latter point can now tuck up their sleeve the fact that the bank’s top brass held fire against the advice of the three experts appointed to advise it.
Gourley said “multiple nuances” lay behind the split, but the main point of contention was the way inflation was likely to travel through the economy, rather than a difference of opinion about how events might play out in the fuel market as a result of the Middle East conflict.
“The assumption around the central projection in the monetary policy statement is that we do see energy prices reduce in line with the futures market, which I think is the best indication the market has at this point.”
Instead, Gourley said her view that a rate rise was justified now was informed by the concern that fuel price increases would “reach every nook and cranny in the economy”.
“I felt that removing the stimulus from monetary policy settings sooner rather than later would help anchor inflation expectations and provide a lower peak — potentially — to inflation.”
That could “lower the negative impacts on growth that are inevitable during inflationary times, smooth that impact, and have a more moderate outcome over the medium term,” she said.
Despite that, the committee was “very aligned on the vast majority of the economic outlook”, Gourley said.
“Those different perspectives, at least for me, came down to probably only a handful of small differences in what we expect to see happen in the future.
“There is no easy monetary policy decision, but this one was particularly difficult because the ‘second round’ and the indirect impacts from fuel price increases really do depend on human behaviour both at the business level and the household level.”
Conway also played down the differences.
“We all agreed on the economic projections. We all agreed on the future track for the OCR.
“The area where we didn’t agree was whether we should kick off a tightening cycle now, or wait. But we agreed on more than we disagreed on.”
There was a one-in-eight chance of a coin tossing the same way four times in a row, he noted, commenting further on the vote.
“It’s happen-stance. That’s just the way it worked out,” he said, revealing bank staff did not discuss their stance before going into each monetary meeting and that he had previously changed his mind as his thinking evolved during meetings.
“That’s sort of out of respect for the process, really. You turn up and it’s a clean page. One vote, one person, no collusion.”
Gourley supported that, saying the vote was “just the way the perspectives fell on this particular occasion. Every member brings an open mind to each decision.”
Conway said that, in his case, that open mind extended to whether or not he might support a rate rise in July, insisting he expected the bank would have more information by then.
“Six weeks is a long time in economics. We’ll know a lot more about the shock, its persistence and magnitude. ‘Will the Strait of Hormuz still be closed or not? Are global energy markets starting to normalise?’ That’s pretty fundamental.”
That didn’t mean the bank was necessarily expecting a clean, binary outcome to the conflict in the Middle East, he clarified.
“I don’t think we’re going back to how it was pre-conflict and, in our assumptions around oil prices into the future, we’ve got about a 20% ‘wedge’ built-in there,” he said.
That would imply an oil price of about US$85 a barrel or “maybe a little south of there”, he confirmed.
“It’s difficult economic times. We’ve got unemployment at 5.4% well into next year. We’ve been through one shock after another.
“Being a monetary policy maker is a technical exercise, but a really important part of our culture here at Te Putea Matua, and certainly within the economics department, is that we can see beyond the graphs and the models and fully understand that there are people behind them,” he said.
“We get that it’s a challenging time, but we have one tool and our focus is on controlling inflation.”