1
The Inflation Outlook
Monetary Policy Review, July 2026
This presentation represents the view of the Monetary Policy Committee (MPC), not of any individual member.
The decision – OCR increased to 2.50% 2
• The Committee agreed by consensus
• The decision is consistent with returning inflation to
2% while avoiding unnecessary economic volatility
• Future OCR decisions will depend on incoming data,
pricing behaviour and demand
The decision – OCR increased to 2.50% 3
• The Committee agreed by consensus
• Some further reduction in monetary stimulus is
likely to be required
• But the timing is highly uncertain
• Future OCR decisions will depend on incoming data,
pricing behaviour and demand 4
Supply-side disruption has eased and crude oil prices
have fallen
Source: Bloomberg, LSEG.
Dubai oil prices
(daily) 5
Refined petrol prices have fallen but remain above
pre-conflict levels
Source: Bloomberg, LSEG.
Dubai oil and refined petrol prices
(daily)
Global conditions have changed since the onset of
the Middle East conflict 6
• Global economic growth has been more resilient
than expected
• Global inflation is increasing
• Market-implied policy rates remain materially
higher than prior to the Middle East conflict 7
Domestic financial conditions have eased
Source: interest.co.nz, RBNZ estimates.
Mortgage interest rates
Source: RBNZ.
New Zealand dollar trade-weighted index
(nominal) 8
Economic growth is expected to recover in the near term
Source: Stats NZ, RBNZ estimates.
Production GDP
(real, quarterly, seasonally adjusted) 9
In the May MPS, inflation was expected to peak at
4.3% in Q3…
Source: Stats NZ, RBNZ estimates.
Headline inflation
(annual) 10
… but may have peaked at 3.9% in Q2
Source: Stats NZ, RBNZ estimates.
Headline inflation
(annual) 11
Our focus is on sustained low and stable inflation
Source: Stats NZ, RBNZ estimates.
Headline and core inflation
(annual)
The outlook remains uncertain 12
Document Title
• Geopolitics
• AI investment
• Fiscal risks
• Price-setting behaviour
• Speed of recovery
• Weather events
Summary 13
• The OCR increased to 2.50%
• Inflation above target but has likely peaked
• Growth expected to pick up from now 14
Full divestment of the LSAP holdings by June 2027 0 10 20 30 40 50 60
2020 2022 2024 2026 2028 2030 2032 2034 2036
$B
NZGB LGFA Total LSAP holdings
Projection
LSAP Portfolio - original divestment plan
Small residual
holdings until 2037 0 10 20 30 40 50 60
2020 2022 2024 2026 2028 2030 2032 2034 2036
$B
NZGB LGFA Total LSAP holdings
Projection
LSAP Portfolio - updated divestment plan
Residual holdings
divested by
30 June 2027 15