The central bank is expecting inflation to abate slightly faster but that unemployment will be slightly higher through next year than it had been expecting in August.
The new forecasts have the OCR averaging 2.4% in the current quarter and easing to 2.2% for the March, June and September quarters of next year but then rising to 2.3% in the December quarter of next year.
Previously, RBNZ had been expecting a 2.5% OCR in the March quarter of 2026 and at 2.6% through the rest of that year.
Some economists have been predicting that a further OCR cut may be required but RBNZ appears to be ruling that out.
The new forecasts have the quarterly inflation rate for the December quarter coming in at 0.2%, below the 0.3% it was forecasting in August, and that the annual rate will drop to 2.1% in the September quarter next year, down from its previous 2.2% forecast.
RBNZ says that the easing of inflation to about 2% by mid-2026 reflects the spare capacity in the economy.
RBNZ thinks the September quarter economic growth was slightly higher at 0.4% than the 0.3% it had been expecting in August, but that the quarterly growth in the December quarter will be slightly softer at 0.7% compared with its earlier 0.8% forecast.
“Lower interest rates are encouraging household spending and the labour market is stabilising,” the central bank says.
The RBNZ has cut the OCR from 5.5% since August 2024.
The unemployment rate is likely to remain at 5.3% through the December and March quarters before easing to 5.2% in the June quarter next year.
In August, it had expected the unemployment rate in the December and March quarters would be 5.2%, easing to 5.1% by the June quarter of next year.
The monetary policy committee says the risks to the inflation outlook are balanced. Greater caution from households and businesses could slow the pace of the recovery, but equally the recovery could be faster than expected if domestic demand proves more responsive to lower interest rates.
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