Resilient Policy Stance as New Zealand’s RBNZ Maintains Interest Rates at 5.25% in November 2025

, 2025, signaling a cautious approach amid a mixed economic backdrop. The Reserve Bank of New Zealand (RBNZ) announced the decision following its monetary policy meeting, emphasizing the need to monitor inflationary pressures while acknowledging the fragility of key sectors such as housing and trade.

The decision aligns with the RBNZ’s broader strategy to maintain policy tightness until there is greater clarity on the trajectory of inflation, which remains above the 2% target. , , but remained elevated by historical standards. Core inflation, excluding volatile food and energy components, , reflecting persistent cost pressures across services and labor markets.

The RBNZ acknowledged that while inflation is showing signs of moderation, the pace of decline remains slower than expected. The central bank noted that global inflation trends, coupled with domestic wage growth and elevated housing costs, continue to pose risks to its disinflation goals. “While progress is being made, the path to 2% remains long and uncertain,” the RBNZ stated. The bank reiterated its stance that monetary policy must remain restrictive until there is stronger evidence that inflation is firmly on a downward trajectory.

One of the key concerns for the RBNZ has been the housing market, which has struggled to adapt to higher borrowing costs. , house price growth has slowed significantly, with some regions experiencing outright declines. The RBNZ noted that mortgage rates remain well above pre-pandemic levels, dampening demand and contributing to a subdued construction sector. This has had a knock-on effect on related industries, including manufacturing and retail.

The trade deficit also remains a focal point for policymakers. , . , . The dairy sector, a cornerstone of New Zealand’s exports, saw milk powder, butter, . However, the persistent trade deficit highlights the ongoing challenge of balancing domestic consumption with export competitiveness.

The RBNZ also pointed to the importance of global economic conditions in its decision-making process. While advanced economies remain resilient, the central bank noted that emerging markets are showing signs of slowdown, which could impact New Zealand’s export-oriented economy. In particular, the RBNZ expressed concern about the trajectory of the U.S. Federal Reserve, noting the internal divisions among U.S. policymakers over the timing and magnitude of rate cuts.

On the domestic political front, Prime Minister announced a planned increase in the Kiwisaver retirement savings scheme, . While this is a forward-looking measure, the RBNZ acknowledged that it could have longer-term implications for aggregate demand and labor market dynamics. The central bank also welcomed the government’s commitment to fiscal discipline and infrastructure investment, which it views as essential for supporting long-term productivity growth.

Looking ahead, the RBNZ indicated that the next policy decision will hinge on incoming data on inflation, employment, and trade. The central bank emphasized that while there is no immediate plan to cut rates, it remains open to adjusting policy if new information suggests that inflation is under control and the economy is stabilizing.

The central bank’s cautious stance reflects the delicate balance it must strike in navigating a complex economic environment. With inflation still too high and the housing sector under pressure, the RBNZ appears to be prioritizing price stability over immediate support for economic activity. The next few months will be critical in determining whether the current policy stance is sufficient to bring inflation down without triggering a sharper-than-expected slowdown in economic growth.