OCR predictions for 2026 & 2027

The above predictions are the latest from the Reserve Bank from their Monetary Policy decision back in November 2025. If they are to be belived, there's a 1 in 5 chance of one final OCR cut by june 2026 - but if that doesn't happen the OCR won't go lower than 2.25%.

In 2026 the bank is predicting that the OCR will remain unchanged, before two to three increases through 2027 and 2028 take the OCR to 2.75% or 3%. 

The Reserve Bank indicated that they're open to cutting the OCR lower than 2.25, but that will depend entirely on employment and economic indicators, as well as global events. For example, if unemployment were to rise again and if the economy didn't recover as expected in 2026, the bank may consider cutting further than they've forecasted. 

On the other hand, if inflation were to increase above 3%, the bank may do the opposite and increase faster than expected. 

Kiwibank has been advocating for further, faster cuts for quite some time now. Their economists are now predicting that the OCR is sitll more likely to go down than up, but that we could be at or near the bottom:

"We still (as the RBNZ) maintain some optionality, with the risk titled towards more cuts (not hikes) near term. We said before the statement that there’s a 50/50 chance of another move in February. The RBNZ sees a reduced risk. We maintain this risk is close to 50/50, and we need to see how the economy develops over summer."

Economists at New Zealand’s largest bank believe the OCR will not be cut again unless economic data is weaker than expected. The bank's economists believe that economic data, in particular GDP, will fare better than the bank expects, which could mean an OCR increase is closer than expected:

BNZ's economist said in a November Markets Outlook paper that they cannot condone sigifcantly more easing because:

"Inflationary pressures are not dead, the impact of past cuts still has some way to play out, the global central banking environment seems to be turning more hawkish, current rate settings are already stimulatory, and very few folk are saying that the level of interest rates is problematic. The latter point suggests that even lower rates may have minimal impact on the factors that are constraining growth anyway."

Westpac believe that the November cut was the last easing we'll see in this cycle, with the RBNZ maintaining a neutral, wait and see approach. The big question now, they say, is when the rate will start increasing:

"The timing of the return of the OCR to higher, more neutral levels will depend on the pace of the eventual recovery. Hence while we continue to see the first hike as occurring in December 2026 (likely after the 2026 General Election), there are two-sided risks to that call. Should the economy pick up relatively quickly, the normalisation of the OCR could come before the election, closer to the middle of 2026. A disappointing recovery could mean the OCR on hold for longer."

In the forecast table in the ASB economic weekly the bank's economists do not have the OCR going below 2.25%. However, their explanation suggests that they see a slight chance of further reduction if economic data were more negative than expected:

"Should data disappoint, particularly in interest-rate sensitive sectors, and core inflation remain on its downward trajectory, the RBNZ should have scope to ease slightly further in 2026."

Many of the economists at major banks and the Reserve Bank are in agreeance. Barring any suprises, the November cut was the end of the easing cycle:

• If economic data were to surprise on the negative side there is a small chance of further cuts in 2026. 

• Following that, the question is - when will the OCR begin to rise? The concensus is that increases will start at some stage in 2027. 

In summary, forecasters expect the OCR to stay the same throuugh 2026 before beginning a gradual increase in 2027. 

The OCR may be at its lowest point, which means that interest rates could be approaching their lowest too. Variable rates have already fallen following the November OCR, and if the OCR remains unchanged in 2026 those rates will too. 

Dpending on what happens next year, short term rates like six, twelve and 18 months may fall slightly or stay the same in the medium term. Meanwhile longer term rates could start increasing soon, as markets start to forecast when the OCR will start to increase.

ANZ provided very sensible general comments on what may be right for borrowers following the November OCR cut:

"... When it comes to which term to select, our broad thinking remains as it was a month ago: we believe mortgage rates are likely at or near their lows, and that it is thus worth considering longer terms. With very little separating rates spanning from 1- 5 years, borrowers with differing levels of risk appetite should be able to find a term that satisfies their own cost/certainty trade-off sensitivities. 

Fixing for 5 years may suit some borrowers, but it may be too long for others, for whom 2-3 years might be the happy middle ground. But there are always risks – some of which could see rates renew their march lower against our expectation – so as always, we think it makes sense to consider spreading rollover risk over several terms."