RBNZ holds its rate at 2.75% in a surprise, while the Fed also stands pat

New Zealand's central bank held after markets had priced a hike, sending the kiwi sharply lower. The Federal Reserve also held, but with two dissents for a hike.

What happened

The Reserve Bank of New Zealand's Monetary Policy Committee voted 4–3 on Wednesday to keep its key rate at 2.75%. Markets and Reuters economist forecasts had pointed to a hike [1]. The New Zealand dollar fell 1.3% intraday against both the US and Australian dollars. It is down almost 5% against the US dollar over six months [1]. Government bond yields also fell [1].

Pricing for a December hike dropped to 40.8%, from close to three-in-four before the decision [1]. Policymakers pointed to easing headline inflation of 3.7%, global energy disruptions and a weaker exchange rate. They kept a tightening bias [1]. FinUties' news monitor logged 40 reports from 12 outlets on this story in recent days, and 109 earlier related reports going back to 25 November 2025.

The same day, the US Federal Open Market Committee voted 10–2 to hold the federal funds target at 3.75–4.00% [2][3]. Lisa Cook and Beth Hammack dissented, preferring a 25 basis point increase [3]. Markets had priced a hike probability of under 10% [4]. The statement upgraded activity to expanding at a strong pace [4]. The Fed cited elevated inflation and said it needed more data to move inflation back toward 2% [2][3].

How we got here

The Fed's path has been shaped by inflation and by political pressure. In late January 2026, President Donald Trump named Kevin Warsh to succeed Jerome Powell as chair [5]. Coverage at the time linked the pick to Trump's preference for lower rates. One economist described Warsh's earlier Fed tenure as relatively hawkish [5][6].

By 15 July, Warsh was chair and told Congress he defends Fed independence. He confirmed frequent contact with the administration [7]. Inflation had stayed above the 2% target for 63 months, although June data showed improvement [7]. In late July, cooler June CPI of 3.5% competed with higher oil prices and US–Iran tensions [8].

At the 28–29 July meeting, the Fed voted 9–3 to hold at 3.5%–3.75%. Three regional presidents dissented in favour of a quarter-point hike [9]. Minutes released on 19 August showed officials ready to tighten if inflation did not decline. July payrolls had fallen 23,000 and unemployment had edged up to 4.1% [9]. The same day, Trump criticised the Fed for not cutting faster [10].

On 5 September, ahead of the 15–16 September meeting, the administration mounted a broad public campaign against a hike. Markets then priced roughly 60% odds of one [11]. The committee unanimously raised the rate by 25 basis points to 3.75%–4% on 16 September, the first hike since 2023. Hours later Trump demanded rates of 1% or less [12].

Oil added to the pressure. On 12 October, prices neared $US107 a barrel after attacks on Saudi Arabia. Treasury yields were at 24-year highs and expectations for higher Fed rates were rising [13]. In New Zealand, an early-October commentary noted that ASB expected further official cash rate hikes toward neutral if inflation stayed sticky [14].

What changed this week is the contrast in outcomes. The Fed held after having hiked in September, and its two dissenters wanted to go further [4][3]. The RBNZ held when a hike was widely expected, and its vote was close at 4–3 [1].

Why it matters for markets

The currency move shows how much of a hike was priced into the New Zealand dollar. A hold with a tightening bias could leave the kiwi sensitive to the next inflation and energy readings, because the 1.3% fall against the Australian dollar suggests traders reassessed the relative policy path [1]. Whether the Reserve Bank of Australia's stance explains that fall is not covered here, so the size of any lasting divergence is not yet known.

For the US, the hold matched expectations, so the direct surprise was small [2][4]. Even so, a December hike remains possible, and futures point to hikes in December and 2027 [4]. A CNBC survey of 30 fund managers and economists found 76% expected a December hike [15]. That could keep the US dollar and US rates supported if energy-driven inflation persists [13].

Treasury yields had eased from late September levels before the decisions. The 2-year yield was 4.68% on 26 October, against 4.92% on 28 September [16]. The 10-year was 5.0%, against 5.24% [17]. A firmer hiking path could reverse part of that decline, while softer data would extend it.

Household costs are the other channel. Mortgage rates are above 7%, and some reports put the 30-year rate near 7.4% [18][19]. Persistent borrowing costs could keep affordability under strain if the Fed tightens again [18].

What to watch

• RBNZ guidance. Watch whether the committee's tightening bias turns into a hike in December, and what the split from 4–3 implies for the next vote. Pricing for a December move now stands at 40.8% [1].
• Energy and inflation data. The RBNZ cited global energy disruptions, and the Fed cited energy costs linked to the war with Iran [1][18]. September US consumer inflation was 3.7% [2].
• Warsh's press briefing. Chair Warsh was due to brief at 2:30 p.m. ET, and his comments could shape December expectations [4].
• Political pressure. The US midterms are six days away, and inflation and Trump's pressure on the Fed are campaign issues [2]. Trump has renewed demands for cuts [19].
• Dissent patterns. Two members wanted a hike on 28 October, after three regional presidents dissented in July [3][9]. Further dissents would show how divided the committee is.
• Labour data. July payrolls fell 23,000 and unemployment was 4.1% [9]. Later labour data could affect whether the Fed's tightening bias holds.

Sources

1. US Top News and Analysis: New Zealand dollar tanks after central bank defies markets' near-certainty it would hike rates, 28 Oct 2026
2. World News: Latest International News & Updates | The Hindu: U.S. Fed holds interest rates steady despite surging inflation, 28 Oct 2026
3. FRB: Press Release: Federal Reserve issues FOMC statement, 28 Oct 2026
4. US Top News and Analysis: Fed holds rates steady despite concerns over inflation, 28 Oct 2026
5. US Top News and Analysis: What Trump Fed chair pick Kevin Warsh may mean for consumers, 30 Jan 2026
6. US Top News and Analysis: Everything you need to know about Kevin Warsh, Trump's pick to lead the Federal Reserve, 30 Jan 2026
7. US Top News and Analysis: Fed Chairman Warsh says he meets 'often' with Trump administration, defends independence, 15 Jul 2026
8. US Top News and Analysis: Federal Reserve is likely to hold interest rates steady. Here's what that means for consumers, 27 Jul 2026
9. US Top News and Analysis: Fed officials saw need for rate hike if inflation doesn't cool, minutes show, 19 Aug 2026
10. US Top News and Analysis: Trump bemoans Fed interest rate policy, says U.S. should be paying much less, 19 Aug 2026
11. US Top News and Analysis: Trump turns up the heat on Warsh as Fed rate hike looms, 05 Sep 2026
12. US Top News and Analysis: Trump demands 1% or lower interest rate after first Fed hike since 2023, 16 Sep 2026
13. Top Stories: Live: Oil prices on the rise as energy supply concerns continue, 12 Oct 2026
14. RNZ News Headlines: What good are economic forecasts in an uncertain world?, 06 Oct 2026
15. US Top News and Analysis: Fed rate hikes are coming, but not this week: CNBC survey, 27 Oct 2026
16. Federal Reserve H.15: US 2-year Treasury yield (H.15), 26 Oct 2026
17. Federal Reserve H.15: US 10-year Treasury yield (H.15), 26 Oct 2026
18. US Top News and Analysis: Fed leaves rates unchanged: What it means for credit cards, mortgages, auto loans and savings accounts, 28 Oct 2026
19. The Hindu: Latest News today from India and the World, Breaking news, Top Headlines and Trending News Videos.: U.S. Fed holds interest rates steady despite surging inflation, 28 Oct 2026

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FinUties generates this briefing for transparency. Published after editorial review. It may summarize source data and does not provide investment recommendations. Data availability at one timestamp does not guarantee future continuity.

Provenance

• Study: event-desk-20261028-rbnz-holds-its-rate-at-2-75-in-a-surprise-while-the-fed-also (7726aff5-6609-44fd-af56-b3d2a8404fa1)
• Author: FinUties Research
• Approved by: FinUties Research at 2026-10-28T22:16:31.532829Z
• Kind: event brief (news sources, not a FinUties dataset study)
• Cited sources: 19 from 5 outlets, all licensed for public use

• Earlier related events cited from 2026-01-30

• Manifest: /api/v1/research/studies/event-desk-20261028-rbnz-holds-its-rate-at-2-75-in-a-surprise-while-the-fed-also/manifest

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