Banks agree on a May pause, but split hard on timing, pace, and the risk of waiting too long
New Zealand's major banks are united on one thing ahead of Wednesday's RBNZ Monetary Policy Statement: the OCR will stay at 2.25% on 27 May. Beyond that, consensus dissolves.
With inflation running above target, oil prices elevated by the ongoing Middle East conflict, and business inflation expectations at a record high, the debate is no longer whether the OCR rises — it's when, how fast, and whether waiting carries a price that borrowers will eventually pay.
The case for July — and why some want to move sooner
ASB and Westpac both favour a July start to the tightening cycle, with ASB forecasting the OCR peaking at 3.25% and Westpac expecting three 25bp hikes by year end.
Westpac chief economist Kelly Eckhold (pictured left) goes further personally, arguing a May move would be well justified, and expects the OCR projections to show the December 2026 quarter rising 40–50bp to around 2.8% — effectively signalling two hikes this year with the chance of a third.
"My view is that the significant shift in the inflation outlook which has occurred since the OCR was cut below 3% in the second half of 2025 justifies a hike at the May meeting," Eckhold wrote in Westpac’s latest economic bulletin, while acknowledging the RBNZ is likely to hold.
ASB senior economists Jane Turner and Wesley Taanuvasa (pictured center and right) are aligned on July but acknowledge the decision is genuinely close. They note the RBNZ provided a checklist in the April Monetary Policy Review — core inflation, medium-term inflation expectations, and wage growth — and against that list, the case for a May move lacks a clear trigger.
"OCR hikes are a matter of when not if. Nonetheless, timing them is hard. We still believe July is the sweet spot for allowing enough time to watch and wait but not letting inflation get away on the RBNZ," Turner and Tanuvasa wrote in ASB’s latest Economic Note.
ANZ chief economist Sharon Zollner shares the July base case but frames the logic around risk management rather than data confirmation.
In ANZ's May Quarterly Economic Outlook, the bank argues the RBNZ has become too uncomfortable leaving the OCR in stimulatory territory, and that the risks of waiting too long now outweigh the costs of moving slightly earlier than pre-conflict plans envisaged.
ANZ expects three consecutive 25bp hikes in July, September, and October, taking the OCR to 3% — and does not rule out a May start, but judges the confidence shock of hiking ahead of schedule would outweigh the marginal benefit of getting to neutral a few weeks sooner.
Kiwibank stands apart — and warns markets are pricing too much
Kiwibank's chief economist Jarrod Kerr is the clearest dissenting voice, arguing that the Iran conflict is causing demand destruction and that OCR hikes would compound rather than solve a cost-of-living crisis already burdening households.
In its latest Our Take note, Kiwibank said it expects the inflation spike to prove temporary, with a return to 2% in 2027, and warns that wholesale market pricing — currently implying the OCR reaching 3.1% or above by year end — is significantly overshooting what the data supports.
Wednesday's MPS carries added significance beyond the rate decision itself. Under the RBNZ's revised Monetary Policy Committee Charter, if the MPC cannot reach consensus, individual member votes will now be publicly recorded and attributed by name — a transparency shift that ASB notes brings the RBNZ closer to the communication style of the US Federal Reserve and the Bank of England. Given the range of views circulating across the major banks, a split vote at the RBNZ itself would not surprise.
Eckhold predicted the RBNZ would signal that it remains vigilant for signs of persistent inflation and second-round effects and stands ready to act decisively should such evidence mount — a message he described as inevitable given how elevated near-term inflation is set to be.
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