The Reserve Bank of New Zealand left the Official Cash Rate unchanged at 2.75% after its October meeting, contrary to expectations for a 25 basis point rise to 3% that money markets had priced at a 100% chance. The Monetary Policy Review said the committee shared an overall inflation outlook, pointing to global factors behind price pressures and judging that stronger, tighter monetary policy was likely, with delivery dependent on the economic outlook. It also said the recovery could be stronger than expected, but may lose momentum if the global environment weakens, while policy remains geared to returning inflation to the 2% target midpoint over the medium term.
Committee Deliberations and Voting
Minutes showed a 4–3 split: Anna Breman, Carl Hansen, Prasanna Gal and Rebecca Williams favoured holding, while Paul Conway, Hayley Gourley and Karen Silk backed an increase. The committee reported risks from higher refined fuel prices and currency depreciation, warned inflation could become entrenched despite the previous two OCR hikes, and observed some domestic financial conditions had eased as the exchange rate fell and some term lending rates declined.
Market Reaction and Economic Indicators
In markets, NZD/USD traded at 0.5600, down 1.46% on the day; earlier levels referenced included a 0.5675–0.5708 range, resistance at 0.5748–0.5769 and the year-to-date low of 0.5564, while CPI was 3.7% YoY, GDP growth was 2.6% YoY versus 2.3% expected, and December hike odds were nearly 50%.
