Cotality Chief Property Economist Kelvin Davidson shares commentary on the February 2026 OCNZ decision
As widely expected, the Reserve Bank’s MonetaryPolicy Committee, under new Governor Anna Breman, held the official cash rateunchanged at 2.25% today. This was firmly in line with the forward guidance from the previousmeeting in November and it reflects the expectation that spare capacity in theeconomy should ultimately pull inflation back down again.
Many of the key economic forecasts released todaywere essentially unchanged from three months ago. The RBNZ expects theeconomy to expand by just short of 3% this year, with employment risingconsistently and the unemployment rate edging down from 5.4% to 5.0% by the endof 2026. CPI inflation may already be back within the 1-3% target band thisquarter.
The decision also noted that “if the economyevolves as expected, monetary policy is likely to remain accommodative for sometime”. This suggestsno immediate rush to bump up the OCR. Even so, the forecast track was‘pulled forward’ a little, pointing to the probability of a rate rise latethis year rather than early next year, as previously indicated. This reallyjust endorses what financial markets and many commentators had already beensuggesting was likely to happen and reflects the Bank’s suggestion that“settings will gradually normalise”.
For the housing market, it also just remains a caseof waiting to see how a range of conflicting forces play out. On one hand, although banks have already beenpushing small moves in some mortgage rates lately, generally they remain fairlystable and much lower than before. This will be supporting property salesactivity and house prices.
By contrast, however, a cautious attitude stillprevails across the market, and it’s difficult to see a sharp turnaround foractivity or prices until jobs growth picks up and the unemployment rate fallsmore emphatically. This looks set to be a story for later in 2026 ratherthan sooner.
Indeed, the RBNZ itself predicts that propertyvalues could even fall a bit further in the next 3-6 months before edginghigher later this year. They could end up flat for 2026 as a whole and only rise by 3.0% in2027. Based on the recent rise in physical housing stock versus population, andalso the new restraint of debt to income ratio caps, it’s hard to disagree toomuch with those modest expectations.
