RBNZ Preview: Is it laying the groundwork for policy path after May?

■ At the Monetary Policy Committee meeting on April 8, the policy rate is highly likely to remain unchanged at 2.25% for the second consecutive meeting.  

■ RBNZ Governor Breman stated that a rate hike or cut cannot be ruled out, but a rate hike is possible in the latter half of the year. 
 
The Reserve Bank of New Zealand (RBNZ) will hold its Monetary Policy Committee meeting on April 8. At the last meeting on February 18, the policy rate remained unchanged at 2.25% for the first time in four meetings since July 2025. However, the military conflict between the United States, Israel, and Iran on February 28 changed the situation. Progress on ceasefire negotiations remains to be seen, but WTI crude oil futures prices have surged again to $115 per barrel, approaching the high of $119 reached on March 9. The RBNZ will consider inflation concerns and the negative impact of rising energy prices on the domestic economy in its policy decisions. 

 
In a speech on March 19, New Zealand's Chief Strategist at the Treasury, Struan Little, stated that under a scenario where crude oil prices are around US$100 per barrel, New Zealand petrol prices would rise by approximately 40 US cents per liter. If the Middle East conflict were to persist for three months, keeping oil prices high, the impact on the Consumer Price Index (CPI) over the year ending June 2026 would be approximately 0.5 percentage points, rising from the baseline forecast of 2.7% to approximately 3.1% to 3.2%. He noted that while the economy is expected to continue growing this year, the pace will be less robust than the baseline forecast. Finance Minister Willis, in a speech on March 30, declined to comment specifically as the core scenario was not yet determined. The Treasury's next economic and fiscal outlook will be released along with the budget on May 28, incorporating the situation in Iran and other factors. 
 
The CPI is projected to rise 3.1% year-on-year in the October-December quarter of 2025, primarily driven by increases in electricity prices, local taxes, and housing rents, with the rate of increase accelerating and exceeding the central bank's target range (1%-3%). The CPI data for the first quarter (January to March), released on the 21st, will be a crucial clue for judging the policy path. However, due to the emergence of a new upward inflationary factor—rising energy prices—the RBNZ, after assessing global uncertainties including the situation in the Middle East, may not rule out the possibility of raising interest rates if it believes that inflationary pressures may be prolonged. Short-term financial markets generally expect the policy rate to be raised to 2.75%-3.00% by the end of the year.