The consensus: a hold at 2.25%

Consensus across economists and markets is overwhelmingly for no change, with the Official Cash Rate remaining at 2.25%. A recent Reuters poll of 35 economists (conducted late March) showed unanimous expectations for a hold, while market pricing implies a high probability of steady policy. Wider economist commentary aligns with this view.

The RBNZ’s February Monetary Policy Statement already signalled a gradual return toward neutral settings over time, but incoming data supports patience — moderating inflation heading toward the midpoint of the target band, spare capacity in the economy, and a strengthening but still cautious recovery. Geopolitical developments are being monitored, but they are not expected to force an immediate shift at this review.

Why this matters for private credit

A hold preserves the accommodative environment that supports borrower cash flows, M&A activity, and infrastructure investment — key deployment channels for private lenders. Many private credit facilities are floating-rate (tied to the OCR or benchmarks), so yields remain attractive in the current range. A stable OCR reduces near-term refinancing stress while avoiding the sharp tightening that could exacerbate arrears.

The real focus tomorrow will be on updated projections. Any hint of earlier or more aggressive hikes — some forecasters are pencilling in at least one 25 bp increase later in 2026 — could introduce caution around leverage-sensitive borrowers. Conversely, a dovish tilt would reinforce the positive backdrop for credit deployment.

The bigger picture: from niche to mainstream

New Zealand private credit is transitioning from niche to mainstream, with real estate still the dominant segment. Capital is available, deployment opportunities are expanding, and specialist lenders are optimistic about 2026. Tomorrow’s widely expected OCR hold should provide a stable platform for this momentum to continue, subject to the RBNZ’s signals on the pace of future normalisation.

The sector’s trajectory looks positive, provided economic recovery materialises and geopolitical risks remain contained.

Growth drivers and 2026 outlook

Structural tailwinds are reshaping the sector heading into 2026:

• Conservative prudential settings in wholesale credit markets, which create openings for private lenders in higher-capital-intensity or non-standard deals.
• Borrower demand for speed, flexibility, and tailored structures that broader credit markets often cannot provide.
• Rising acceptance among mid-market corporates and sponsor-backed borrowers.

Domestic funds have received a capital boost via the Active Investor Plus visa scheme, creating dry powder and deployment pressure. Fundraising has been challenging at times, but inflows have improved.

Specialist lenders entered 2026 with cautious optimism. Most are optimistic or very optimistic about the domestic economy over the next 12 months, with many prioritising sustainable growth. Key focus areas include technology and AI transformation, product diversification into underserved segments, and proportionate regulation.

Risks and challenges

• Rising arrears sector-wide, now at their highest level in five years — consumer and personal lending particularly stretched.
• Higher funding and operational costs.
• Geopolitical uncertainty and execution risks around technology transformation.

Overall, the sector is resilient and positioned for expansion, especially if economic recovery broadens and M&A rebounds. At Blossum, conservative valuation assessments are conducted on all security properties, and a disciplined portfolio-weighted LVR policy means the Blossum Wholesale Fund is positioned to deploy capital selectively across a range of rate environments.

Final thoughts

— Chris Kelly, Investment Manager, Blossum