Reserve Bank hikes rates at ‘challenging time’ for retail

The decision was made by consensus vote (Source: Retail NZ)

By Harry Booth Jul 9, 2026

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The Reserve Bank of New Zealand’s monetary policy committee has voted to increase the official cash rate by 25 basis points to 2.5 per cent.

The consensus decision cited the impacts of the US-Iran war on the global economy, particularly following the closure of the Strait of Hormuz. While – at the time of the decision – the bank said that situation had begun to calm, along with global oil prices, the risk of rising inflation in the medium term remains uncertain.

But the country’s leading representative body for the retail industry, Retail NZ, has sounded the alarm about the potential impact of the decision.

“It has been a challenging time for retailers in recent months, with the tough economic environment and lower consumer spending taking its toll on the sector,” said Retail NZ CEO Carolyn Young.

“Today’s decision by the Reserve Bank will make many of our members nervous.

“Hikes to the OCR can impact confidence and reduce consumer spending as interest rates rise, directly affecting homeowners through higher mortgage rates and other debt.”

Young said that nine consecutive rate cuts by the Reserve Bank between 2024 and 2025 were intended to stimulate economic growth. However, she said that they were unsuccessful in positively affecting spending or confidence across businesses and consumers.

“Retailers have been feeling the effects of rising overheads in terms of fuel and freight costs, as well as higher power prices during these cold winter months,” she added. “They know as well as anyone that next week’s inflation number is likely to show a noticeable increase, and that it is in their interests to get inflation back down to the Reserve Bank’s target range.”

The Reserve Bank said that the country’s economic recovery was “underway” before the US-Iran war began. “Growth is expected to resume in the September quarter as these effects fade and confidence improves,” it added.

“Over the medium term, inflation returning to the 2 per cent target midpoint will lift household purchasing power and help support a sustained recovery in growth and employment.”