Reserve Bank rate rise appears more likely than not as calls grow for ‘normalisation’

Monday, 6 July 2026

With fuel crisis fears starting to fade, top economists are leaning towards the Reserve Bank raising the Official Cash Rate (OCR) this week - with more rate rises set to follow later in the year.

Concerns about high levels of oil-induced inflation becoming baked into pricing decisions and wage negotiations have eased, amid a de-escalation of the Middle East conflict.

But that has been offset by an expectation the central bank will want to bring the OCR back close to a neutral setting on the assumption that economic growth is picking up.

Among the most widely cited pundits, ANZ, BNZ, Capital Economics and British-based bank HSBC have all tipped a rate rise - the likely figure by 25 basis points to 2.5%.

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But ASB, Westpac and fund manager Salt are forecasting the Reserve Bank will hold off for now, with Kiwibank also arguing it makes sense for the central bank to wait it out and “give the economy breathing room”.

ANZ chief economist Sharon Zollner said it would all be about risk management for the bank.

“With the OCR still 75 basis points below the Reserve Bank’s central estimate of ‘neutral’, growth conditions supportive, the New Zealand dollar much softer than assumed and inflation set to sit above the band for a period, it’s sensible to get a hike under the belt, despite the sharp fall in oil prices.”

A neutral rate is one where the OCR is neither on the economic accelerator nor on the brakes.

HSBC’s chief economist for Australia and New Zealand, Paul Bloxham, said it was becoming increasingly clear the economy didn’t need the OCR to be sitting well below neutral.

“At its last meeting, back in late May, the Reserve Bank board got as close to delivering a hike as possible, without actually hiking. We see the Reserve Bank taking one step towards policy normalisation,” he said.

“The next inflation print will be a high one, even if the better news from the Middle East means it is likely to be the peak. There is also an outstanding risk, as we have seen over the past week, that the Strait of Hormuz is still somewhat disrupted periodically, leaving input costs – fuel and fertiliser – higher than in the past.”

Wednesday’s Reserve Bank meeting will be to review the OCR, rather than issue a full monetary policy statement.

That means it is not expected to publish fresh detailed forecasts setting out where it expects the OCR and other key indicators to track over the next few years.

Supporting its expectation of a hold, Westpac said its employment confidence survey showed the labour market was still fragile, suggesting upward pressure on wages was unlikely.