The kiwi has lost nearly 5% against the U.S. dollar in six months.
Why it matters: The surprise hold shows how quickly currency markets can reprice central-bank expectations. A weaker New Zealand dollar can also raise import costs while inflation remains above the RBNZ's target band.
- The RBNZ held its Official Cash Rate at 2.75% on October 28, against expectations for a hike to 3.00%.
- The decision was split 4-3, with three Monetary Policy Committee members favoring a 25-basis-point increase.
- NZD/USD fell as much as 1.7% after the announcement and was reported near $0.5616.
- Annual inflation was 3.7% in the September quarter, while the RBNZ expects it to reach 4.4% in the December quarter.
The Reserve Bank of New Zealand held its Official Cash Rate at 2.75% on October 28, interrupting a tightening sequence that began with a 25-basis-point increase on September 2.
Markets had broadly expected another 25-basis-point hike to 3.00%. Instead, four Monetary Policy Committee members voted to hold and three backed an increase.
The New Zealand dollar fell sharply after the decision. NZD/USD dropped as much as about 1.7% in early trading and was reported near $0.5616, according to market reporting. CNBC reported that the currency had declined nearly 5% against the U.S. dollar over the preceding six months. That longer-term performance should not be attributed entirely to the October decision.
The policy choice came despite inflation remaining above the RBNZ's 2% midpoint. Stats NZ reported annual CPI inflation of 3.7% and quarterly inflation of 0.7% in the September quarter, down from 4.1% annually in June.
The RBNZ said core inflation had risen to around the top of its 1%-3% target band and that price increases had become more broad-based. It expects annual inflation to rise to 4.4% in the December quarter, citing higher fuel prices and disruptions to global energy markets.
All committee members agreed tighter policy would likely be required, but said timing depended on the economic outlook. The bank also said its trade-weighted currency index had fallen approximately 3% since its September policy statement.
By the numbers
- 2.75% - Official Cash Rate after the October 28 decision
- 1.7% - Maximum reported immediate NZD/USD decline
- 4.4% - RBNZ forecast for annual inflation in the December 2026 quarter
Yes, but: The six-month currency decline is cumulative background performance, not a measure of the October decision alone. The narrow vote and guidance toward eventual tightening also complicate any conclusion that the RBNZ has lost credibility.
What's next: The RBNZ's next scheduled monetary-policy decision is December 9, 2026.