A short explainer on how New Zealand's Official Cash Rate is decided, who decides it, and the mechanical path from an OCR change to commercial interest rates.
The Official Cash Rate is New Zealand's main monetary-policy lever. The Reserve Bank of New Zealand reviews and sets it through a Monetary Policy Committee whose decisions are published seven times a year.
What the OCR actually is
The OCR is the interest rate the Reserve Bank pays commercial banks on settlement-cash balances held overnight. Because those balances are highly liquid, the OCR establishes a floor for the shortest-dated rates in the banking system. The RBNZ maintains an explainer on the mechanics of cash settlement.
How a change reaches household rates
When the OCR moves, commercial banks reprice their own funding and, with a lag, their lending rates. The pass-through is not instantaneous and varies by product — mortgages with fixed terms in place are unaffected until the term rolls. Historical pass-through rates are documented in published RBNZ research.
Why it's reviewed multiple times a year
Seven scheduled reviews plus the ability to hold out-of-cycle decisions gives the committee responsiveness without producing volatility from overly frequent changes.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.