RBNZ cuts OCR to 3%, sees it bottoming at 2.5% in the March 2026 qtr

These new forecasts come as the central bank cut the OCR from 3.25% to 3%, as was widely expected.

The bank is now forecasting an OCR of 2.7% in the December quarter and 2.5% in the March quarter of 2026. In May, it was signalling a 2.9% OCR for these two quarters.

RBNZ acnowledged that the recovery had stalled in the June quarter, blaming “global economic policy uncertainty, falling employment, higher prices for some essentials, and declining house prices.”

The central bank said it could see both upside and downside outcomes from here, but that it still thinks there's scope to lower the OCR further.

At least one economist, Stephen Toplis at BNZ, has changed his forecasts to pencil in a further rate cut, putting him in line with RBNZ's expectations.

The NZ dollar reacted sharply to the change in the OCR outlook, falling about 80 points to 58.27 US cents.

RBNZ is now expecting consumers price inflation will peak at 3%, at the top of its 1% to 3% target band, with the quarterly rate expaning 0.9% in the September quarter, slightly higher than its May forecast of 0.8% for that quarter.

It expects inflation will ease to 0.3% in the December quarter, above its May forecast of 0.2%. Its quarterly forecasts beyond this year havent changed much but it expects slightly higher quarterly inflation through 2026 and slightly lower quarterly inflation through much of 2027.

The annual pace of the CPI is expected to be higher at 2.3% in the first quarter of 2026, up from 1.9% previously, and at 2.2% in the June and September quarters of 2026, up from 1.9% and 2.1% respectively in its May forecasts.

The unemployment rate is expected to peak at 5.3% in the current quarter, up from the May forecast of 5.2%, and to not fall below 5% until the December quarter of next year.

The economy is expected to grow at a slightly faster 0.3% in the current quarter compared with the May forecast of 0.2%, but growth in the December quarter is expected to be 0.8%, down from its May forecast of 0.9%.

The economy should grow 0.7% in the March quarter next year, down from the previous 0.8% forecast, by 0.6% in the June and September quarters, down from 0.7% previously.