A knife-edge 3-3 split vote — and a clear signal of what comes next
The governor is waiting — but the clock is ticking
Westpac chief economist Kelly Eckhold framed the hold as a deliberate strategy with a limited shelf life. The internal members are looking for evidence of broadening core inflation, wage pressure, and rising long-term inflation expectations before acting — data that won't be available before the July meeting.
Eckhold noted the governor appears keen to wait until the RBNZ sees the "whites in the eyes" of core inflation before responding. In his view, that inevitably means the RBNZ will be late to the party.
ASB economist Wesley Tanuvasa and chief economist Nick Tuffley were more pointed about the direction of travel. Despite the split decision, they noted a clear tightening bias in the record of meeting.
"The committee remains focussed on bringing medium-term inflation back to target and expects that OCR increases will be required this year," RBNZ said.
The ASB team read the published OCR projection — which signals approximately an 80% probability of a July hike — as consistent with their own call for consecutive 25bp increases from July, with the OCR peaking at 3.25% by year end.
What the inflation outlook means for fixing decisions
The RBNZ revised its inflation forecast sharply upward, now expecting CPI to peak at 4.3% in the September 2026 quarter before returning to the 2% target midpoint in mid-2027. The driver is the Iran conflict's effect on global oil and fuel costs, with direct petrol and diesel effects alone contributing approximately 1.2 percentage points to the June quarter CPI projection.
Westpac went further on the terminal rate, warning that the delay in beginning the tightening cycle increases our confidence that the OCR will need to rise to 4.25% ultimately before inflation is sustainably returned to 2%.
Independent economist Tony Alexander offered a candid assessment of the uncertainty surrounding any rate forecast right now. Just as with the GFC and the pandemic, he noted, we are dealing with a disruption to global oil supply without modern precedent — and "none of us is likely to get our forecasts right." That uncertainty has direct implications for how clients should approach fixing decisions.
"Periods of enhanced uncertainty mean gambling on rate movements by fixing one's mortgage interest rate for only a short period of time is riskier than normal," Alexander wrote on OneRoof.
Medium- to long-term fixed rate periods are more valuable, he added. He currently favours a three-year fix to get well beyond the period of lingering inflation and rate uncertainty associated with the oil price shock.
A market holding its breath — and clients who need a call
On the ground, the property market is reflecting that same caution.
LJ Hooker head of research Mathew Tiller said holding the OCR steady was the right outcome for now. The market remains on the softer side with activity still below more normal levels, and a rate hold should help support buyer confidence through winter without adding further pressure on already-stretched households.
But Tiller noted the bigger story has shifted — markets have largely moved on from asking whether rates have peaked and are increasingly focused on when the next move higher could arrive.
REINZ April data captures that cautious mood: national sales totalled 6,262, down 7.9% year-on-year, while the national median house price eased 0.6% to $775,000. Tiller described it as a slower market rather than a stressed one, with buyers still present but taking more time and becoming more price conscious.
For more insights, see the Westpac and ASB reports.
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