Novel Zealand Reserve Bank Holds Rate, Signals Shift to Hawkish Stance Under Governor Breman
The Reserve Bank of New Zealand (RBNZ) held the Official Cash Rate (OCR) steady at 2.25% at its first meeting under new Governor Anna Breman on Wednesday, February 17, 2026. However, the accompanying monetary policy statement signaled a significant shift in tone, indicating the era of interest rate cuts is over and future adjustments are more likely to be upward. This marks a departure from 2025, when the RBNZ cut rates at every meeting except one.
Inflation and Economic Outlook
The decision comes as annual inflation in New Zealand sits at 3.1% as of the December quarter, slightly above the RBNZ’s target range of 1-3%. Despite concerns about the potential impact of rising mortgage rates on the New Zealand economy, Governor Breman has emphasized a firm focus on controlling inflation, expecting it to fall to around 2% by mid-2026.
Market Expectations and Bank Forecasts
Even as a rate hike was not expected at this particular meeting, market analysts anticipate potential increases later in the year. BNZ head of research Stephen Toplis expects the first rate hike in September, a more aggressive forecast than other major banks. ANZ chief economist Sharon Zollner anticipates the RBNZ will aim to avoid fueling further expectations of rate hikes, with forecasts suggesting a rate increase is more probable by year-end. Westpac chief economist Kelly Eckhold predicts a hike in December, followed by rate increases at every meeting through the first half of 2027.
Impact on Mortgage Rates
Fixed mortgage rates have already begun to rise since November, with longer-term swap rates increasing by around 50 basis points following the last RBNZ decision. This reversal impacts property owners who had previously benefited from months of declining rates. Governor Breman acknowledged in December that banks increasing mortgage rates after the RBNZ’s rate cut “risks putting a dampener on New Zealand’s economy.”
Breman’s Approach and Transparency
Governor Breman, who took office on December 1, 2025, has indicated a commitment to increased transparency in the RBNZ’s monetary policy decisions. ASB economist Wesley Tanuvasa suggests this may lead to more detailed insights into the views of the monetary policy committee in future meeting records. Breman has stated she will “be relentless in reminding everyone why this is crucial and why it’s so hard to acquire healthy growth in a strong labour market unless you have low and stable inflation.”
Divergent Views Among Economists
Not all economists share the expectation of imminent rate hikes. Kiwibank chief economist Jarrod Kerr argues that the market has priced in too many hikes for 2026, describing the current pricing as “too punchy, and premature.” He believes the economic recovery remains fragile and that inflation will ease to 2% through 2026 without the demand for rate increases.
Recent RBNZ Leadership Changes
This monetary policy statement follows a period of transition for the RBNZ, marked by the resignations of former Governor Adrian Orr and chairman Neil Quigley. Governor Breman will appear before Parliament’s finance select committee on Thursday, February 19, 2026, to discuss the statement and answer questions from lawmakers.