RBNZ surprises markets, holds OCR at 2.75% in 4–3 vote; kiwi dollar falls

The Reserve Bank of New Zealand (RBNZ) left its official cash rate (OCR) unchanged at 2.75% on Wednesday, October 28, 2026, surprising financial markets that had almost fully priced in a quarter-point rise to 3.00%. The Monetary Policy Committee was split 4–3, and the New Zealand dollar fell against every major currency as soon as the decision was announced.

The decision

The committee said it voted 4–3 to hold the OCR at 2.75%. Governor Anna Breman was in the majority, together with three other members, while three members wanted to raise the rate by 25 basis points. Despite the pause, the committee agreed that tighter monetary policy is still likely to be needed, though it said that remains conditional on how the economy develops.

Item	Detail
Decision	OCR held at 2.75%
Market expectation	Rise to 3.00% (almost fully priced)
Vote	4–3 to hold
Voted to hold	Governor Breman, Hansen, Gai, Williams
Voted to hike	Silk, Gourley, Conway
Currency reaction	NZ dollar down against all major currencies; NZD/AUD near 0.798, a cycle low
Next decision	December 9, 2026 (with Monetary Policy Statement)

Why the bank held

The majority argued that the two recent increases in the OCR need more time to feed through to the economy. Third-quarter inflation figures, published on October 22, came in weaker than expected, and the governor stressed this point. The bank also found that the knock-on effects of higher fuel prices on other prices had been smaller than it feared, that inflation expectations were stable and that wage growth was subdued.

The three members who wanted a hike focused on underlying inflation, which has been above the 2% midpoint of the bank's 1–3% target for some time, and on the risk that higher inflation becomes built into how businesses set prices.

The committee also listed global risks, including geopolitical tension, high energy prices, rising government debt worldwide and questions about whether heavy spending on artificial intelligence will pay off.

Market reaction

Before the announcement, one market measure put the chance of a hike at about 98%. The New Zealand dollar dropped sharply afterwards and touched a new cycle low against the Australian dollar, a move made bigger by hotter-than-expected Australian inflation figures released later the same morning. The bank did not appear concerned by the weaker currency.

Westpac economists said the pause had been signalled in the September statement and still expect a 25-basis-point rise in December, though they called it "not a done deal". They see further increases in 2027, with the OCR peaking at 4% by September next year.

Why it matters

For New Zealand borrowers, the pause means mortgage rates may not climb as quickly as banks had signalled, offering short-term relief to households already facing high living costs. For savers and importers, a weaker kiwi dollar cuts the value of their money abroad and makes fuel and imported goods dearer.

The decision also shows central banks across the Asia-Pacific region diverging as the oil shock continues: Australia's Reserve Bank is expected to consider a rise next week, Pakistan's central bank raised rates on Monday, and the US Federal Reserve announces its own decision later on Wednesday.

What happens next

New Zealanders vote in a general election on November 7, 2026. A Labour-led government has promised to restore the RBNZ's dual mandate covering both inflation and employment, which could change expectations for future policy. The bank's next decision, with a full Monetary Policy Statement and updated forecasts, is due on December 9, 2026, followed by February 10, 2027.