The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee has voted to raise its official cash rate (OCR) to 2.75% because of persistently high fuel prices linked to the US-Israeli war in Iran.
Core inflation, expected wage growth, and inflation expectations remain on target, RBNZ Governor Anna Breman said on 3 September. But elevated fuel, fertiliser, and petrochemical costs are expected to raise consumer prices over the rest of 2026, the bank said in its September Monetary Policy statement.
The Committee raised its OCR by consensus, Breman told reporters. “[Its decision] balances containing inflationary pressures against the risk of holding the OCR and then having to raise it faster and to a higher level,” the RBNZ said.
Four of the Committee’s members – including Breman – saw upside risks to medium-term inflation, while two saw balanced inflation risks.
“I thought that there was potential for a little more upside risk [partly because] of the ongoing nature of the Middle East conflict and the risk of [persistently high oil and petrochemical prices,” Committee member Karen Silk said.
But two members of the Committee saw inflation risks as balanced because of the potential for weaker-than-expected economic activity, house prices, and household spending growth, the RBNZ said.
New Zealand fuel prices have been elevated since the start of the US-Israeli war in Iran on 28 February, largely because of months of shipping disruptions in the Strait of Hormuz, and may remain high over the next few months.
Brent crude oil futures – which influence refined fuel prices – last traded at $95.59/barrel (NZ$163.51/barrel) on 2 September, up from $83.77/barrel on 3 August and $72.87/barrel on 27 February, data from Trading Economics show.
Unleaded 91 octane petrol and diesel prices also averaged NZ$2.99/litre and NZ$2.68/litre, respectively, across New Zealand on 2 September, data from price monitor Gaspy show. New Zealand petrol and diesel prices averaged NZ$2.66/litre and NZ$1.87/litre, respectively, on 27 February, Ministry of Transport data show.
By Avinash Govind