RBNZ Prasanna Gai: OCR May Already Be Within Neutral Zone
- Published on
- 07 Sep 2026, 10:59 PM
--No strong view on whether OCR needs to move to restrictive zone
--Comfortable with OCR track published in MPS
--Gai’s view appears balanced, not too hawkish
--Focus on inflation expectations, pricing behaviour
--Voting pattern shifts with circumstances
By Sophia Rodrigues
(Sydney, September 7, 2026) – The Reserve Bank of New Zealand’s official cash rate may already be within the neutral zone, and it doesn’t necessarily need to move into restrictive territory to return inflation to the target mid-point.
The RBNZ’s external monetary policy committee (MPC) member Prasanna Gai made the comment in an interview with Market News International Monday.
Gai suggested “it is plausible that the OCR is already within the neutral zone” even as he acknowledged the neutral rate could shift as conditions evolve.
He didn’t hold a strong view on whether further policy tightening will be required, saying he is comfortable with inflation tracking along the projected path.
The RBNZ’s OCR track published in the Monetary Policy Statement (MPS) last week pointed to another 25bps hike to 3% in December.
Gai is widely considered as the most hawkish MPC member in this tightening cycle, but his latest views appear relatively balanced.
“As circumstances change, your voting pattern will also move with it,” Gai said in a separate interview with Herald Now Business.
One reason might be his focus on forward-looking indicators like the inflation expectations and survey evidence on firms’ pricing behaviour.
These indicators have been pointing to anchored inflation expectations, resulting in the RBNZ’s latest OCR track mirroring the May MPS.
On economic growth, Gai noted growth is a secondary objective in the RBNZ’s mandate but “central bankers are very mindful of both consequences for price stability as well as output volatility.”
“It’s a fine balance between short-term inflation pressures and ensuring that the economy continues to roll forward with appropriate momentum,” Gai told Herald Now Business.
The key points from the interview were published by the RBNZ.
--Contact: Sophia@centralbankintel.com