RBNZ Maintains Steady Policy Stance Amid Mixed Economic Signals

On October 9, 2025, the Reserve Bank of New Zealand (RBNZ) announced its latest monetary policy decision, maintaining the Official Cash Rate (OCR) at 5.25 percent. The decision was consistent with market expectations and reflects the central bank’s cautious approach in navigating a complex economic landscape marked by uneven inflationary pressures and cooling labor market conditions.

Policy Outcome and Statement Highlights

The RBNZ left the OCR unchanged for the second consecutive meeting, following a 25-basis point increase in July 2025. In its accompanying statement, the central bank emphasized that recent economic data had shown a “gradual moderation in inflation,” while acknowledging that underlying price pressures remained above target. The bank also noted ongoing resilience in domestic demand, particularly in the services sector, but pointed to softer-than-expected activity in construction and housing.

The statement emphasized that the RBNZ would remain vigilant in its inflation-fighting mandate, with policy decisions to be guided by incoming data and the evolution of inflationary risks. The bank reiterated its commitment to achieving price stability, defined as a two-year average of inflation within a 1–3 percent range.

Inflation and Economic Outlook

Headline consumer price inflation is currently estimated at 3.8 percent for the year to August 2025, down from a peak of 7.3 percent in mid-2023. The RBNZ noted that core inflation, excluding food and energy, had also edged lower, though it remained above target due to persistent services price increases. The bank cited continued wage growth and capacity constraints in certain sectors as contributing factors.

On the labor market, the unemployment rate rose to 5.8 percent in the second quarter of 2025, up from 5.3 percent the previous quarter. Wage growth, however, remained at 5.1 percent annually, a level the RBNZ said would “take time to fully feed through to inflation.” The central bank underscored the importance of balancing labor market dynamics with inflation control in shaping its policy path.

Forward Guidance and Next Steps

The RBNZ provided limited forward guidance, emphasizing that future decisions would depend on the trajectory of inflation and the strength of economic activity. The bank indicated that it would assess the impact of higher interest rates on inflation and growth before considering further tightening or easing.

The next monetary policy decision is scheduled for November 20, 2025. The RBNZ will review a wide range of indicators, including inflation data, employment figures, and business and consumer sentiment, ahead of the meeting.

With inflation showing early signs of moderation and growth easing, the RBNZ’s decision underscores a strategic pause, allowing time to assess the cumulative effect of past tightening while maintaining a firm stance against inflationary pressures.

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