The official cash rate has been held at 3.25 per cent following a decision by the Reserve Bank’s Monetary Policy Committee on Wednesday.

The move was widely anticipated as the RBNZ had cut the cash rate consecutively from 5.5 per cent last August to the current level last month.

The central bank expects annual consumer price inflation to increase towards the top of its 1-3 percent target band this year. 

However, it predicts headline inflation to remain in the band and return to around 2 percent by early next year amid spare productive capacity in the economy and declining domestic inflation pressures.

While elevated export prices and lower interest rates are supporting a recovery, heightened global policy uncertainty and tariffs will likely slow the pace, the central bank stated.

As the economic outlook remains uncertain, the RBNZ said it will monitor further data on economic recovery, inflation, and the impacts of tariffs to make future cash rate decisions.

It expects a potential cut if medium-term inflation pressures continue to ease as projected.