MNI RBNZ Review-July 2026: More Hikes To Reduce Stimulus

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EXECUTIVE SUMMARY: 

• In a unanimous decision, the MPC decided to hike rates 25bp to 2.5%, as expected. It decided that it was “appropriate” to remove some accommodation to return inflation to the 2% band mid-point and prevent further easing in financial conditions.
• Further removal of monetary stimulus is likely but the RBNZ kept its options open regarding timing stating that it would be “highly uncertain” and very data dependent. However, Governor Breman two more hikes before year end were “not not realistic”. This opens the two remaining 2026 Monetary Policy Statement meetings, which include updated staff forecasts, on 2 September and 9 December to further tightening with a possible pause on 28 October.
• 62bps of tightening is currently priced for February 2027. Interestingly, pricing remains 7-10bps softer across 2027 meetings versus levels prevailing before the May 27 policy meeting.