All major banks expect the OCR to stay at 2.25% this week, but the debate beyond that is heating up
New Zealand's major banks are unanimous heading into Wednesday's Reserve Bank Monetary Policy Statement: the OCR will stay at 2.25%. But the path from there divides sharply.
Three camps: move now, move in July, don't move yet
Westpac chief economist Kelly Eckhold takes the most hawkish position among the major banks, arguing a May move would be well justified.
"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.
He expects the OCR projections released Wednesday to signal the December 2026 quarter rising 40–50 basis points to around 2.8% — effectively flagging two hikes this year with the chance of a third.
ASB and ANZ both favour July as the starting point for tightening.
ASB senior economists Jane Turner and Wesley Tanuvasa acknowledged the decision is genuinely close, framing the hold case around the RBNZ's own checklist from April — core inflation, medium-term inflation expectations, and wage growth — and concluding that the data doesn't yet deliver a clear trigger for May.
"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," they wrote in ASB's latest Economic Note.
ASB forecasts the OCR reaching 3.25% by December.
ANZ chief economist Sharon Zollner shares the July base case but frames it around risk management rather than data confirmation, arguing the RBNZ has grown too uncomfortable leaving the OCR in stimulatory territory. ANZ expects three consecutive 25 basis point hikes in July, September, and October, taking the OCR to 3%, while not ruling out a May start.
BNZ's Stephen Toplis takes a slightly later view, expecting hikes to begin in September with the OCR peaking around 3.25% in early 2027, and argues the RBNZ should be moving to neutral as soon as possible.
Kiwibank chief economist Jarrod Kerr is the clearest dissenting voice among the major banks, warning that the Middle East conflict is causing demand destruction and that rate hikes would compound rather than solve the cost-of-living pressure already weighing on households.
"Hiking early will only kick the economy while it's down. The fear that this will be another COVID situation is unwarranted," Kerr said.
Kiwibank sees no need for hikes this year, expects inflation to return to 2% by 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 justifies.
The NZIER Shadow Board's hold camp echoes those concerns independently. BusinessNZ economist John Pask pointed to the sharp fall in business and consumer confidence alongside residual spare capacity, while Sharesies CEO Brooke Roberts noted that current inflation is being driven by volatile oil and electricity prices rather than domestic demand, with unemployment rising toward 5.6% and GDP growth at just 0.2% last quarter.
Why Wednesday matters beyond the rate call
The MPS carries added significance. Under the RBNZ's revised Monetary Policy Committee charter, if the committee cannot reach consensus, individual votes will now be publicly recorded and attributed by name — a transparency shift that brings the RBNZ closer to the communication styles of the US Federal Reserve and the Bank of England. Given the range of views across the major banks, and the three Shadow Board members already calling for a hike, a split vote at the RBNZ itself would not surprise.
On the messaging front, 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.
For mortgage holders and the brokers advising them, the message from all sides of the debate is consistent: the OCR is heading higher. The only open questions are how soon, how far, and whether waiting carries a cost that borrowers will eventually pay.
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