New Zealand central bank gives first rate hike to 2.5%

The Reserve Bank of New Zealand raised its benchmark interest rate on Wednesday, July 8, marking its first increase in more than three years as it seeks to curb persistent inflation. The central bank's monetary policy committee unanimously decided to lift the Official Cash Rate by 25 basis points to 2.5 percent, up from 2.25 percent where it had been held since November 2025.

The move, widely anticipated by economists and financial markets, follows a period of economic recovery after a significant downturn. New Zealand's gross domestic product contracted 1.1 percent in the year to June 2025 but has been strengthening in 2026. Inflation, however, has remained stubbornly above the bank's target range, with headline inflation at 3.1 percent in March. The unemployment rate eased to 5.3 percent.

In a statement, the committee said it agreed it was appropriate to start reducing the degree of monetary stimulus to ensure inflation returns to its target of 1 to 3 percent over the medium term. It noted that while global oil, gas, and fertilizer prices have declined since the outbreak of conflict in the Middle East in February, supply chain adjustments take time and inflationary pressures...