RBNZ Holds Cash Rate at 2.25% Amid Oil Supply Shock

The Reserve Bank of New Zealand held its Official Cash Rate steady at 2.25 percent on Wednesday, opting for caution amid escalating geopolitical tensions in the Middle East that have triggered a global oil supply shock and heightened inflation risks.

The Monetary Policy Committee cited the conflict's disruption of energy flows through the Strait of Hormuz as a key factor reshaping the economic outlook. Oil prices have surged to around 120 dollars a barrel following attacks on regional energy assets and Iran's effective closure of the strait, marking the largest supply disruption in market history according to the International Energy Agency. This has led to higher fuel and refined product costs worldwide, feeding into supply chains and pushing up prices for transport, food, and other energy-sensitive goods.

In New Zealand, annual consumer price inflation stood at 3.1 percent in the fourth quarter of 2025, but the bank now forecasts it climbing to 3.0 percent in the first quarter of 2026 and 4.2 percent in the second quarter, driven primarily by elevated fuel costs. The committee emphasized its focus on medium-term price stability, stating it remains vigilant against broader...