Nomura Sees New Zealand's Central Bank Starting Rate Hikes in 2027

10:52 AM EST, 12/04/2025 (MT Newswires) -- Nomura said it believes the rate-cutting cycle at the Reserve Bank of New Zealand has most likely ended.

The reasons for this forecast are that, one, the economy is now commencing what appears to be an enduring recovery, and, second, monetary policy is now in accommodative territory, while as third, inflation is still at the top of the RBNZ's target band and forecast to decline only slowly.

The RBNZ has a singular inflation remit, so future inflation data remains "critical," wrote the bank in a note to clients.

One risk to Nomura's RBNZ view relates to the central bank's strategy from this point. It could elect to drive policy more aggressively into stimulatory territory to secure a recovery, and then attempt to deftly pull back on accommodation as growth rebounds.

This is a legitimate strategy, but likely a high-risk one, stated the bank. In retrospect, the RBNZ over-stimulated during the post-COVID period, and with inflation forecast to remain above target for some time, it may be wary of easing too far.

Nomura sees no material policy implications from the commencement of Anna Breman - the former head of Sweden's Riksbank -- as the new RBNZ governor from last Monday. The Riksbank also has a primary focus on achieving an inflation rate of 2%.

In the bank's base case, the OCR remains at current levels through 2026. As the New Zealand recovery picks up, growth rises above trend and unemployment declines, Nomura forecasts three 25bps rate hikes in 2027, taking the cash rate back to neutral levels.

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