The Reserve Bank is set to increase the OCR again. Photo: RNZ
The Reserve Bank is set to deliver another rise in the official cash rate (OCR) but the end to the aggressive series of interest rate hikes may be in sight.
A 25 basis point increase to 5 percent, a level last seen in December 2008 and the 11th in consecutive rise is regarded as a given by financial markets.
But the rise would be the smallest since the start of 2022, and might be taken as a sign the RBNZ was turning the corner in the fight against inflation, which sits stubbornly near a record high of 7.2 percent.
"The Reserve Bank is nearing the point at which it can 'watch and wait' as higher interest rates do their work, but for now it will leave the door open for further hikes," Westpac chief economist Kelly Eckhold said.
The central bank's front loading of rate rises meant the full impact of the rises had yet to be felt with many mortgages still to roll onto much higher rates in the year ahead, he said.
The shock 0.6 percent contraction in the economy at the end of last year was one sign that economic activity has been slowing, along with some partial signs that the labour market and wages have also been easing.
Near the end
The latest NZ Institute of Economic Research's (NZIER) closely followed business confidence survey also offered more hints of a slowing economy and a softening of inflation pressures.
Its principal economist Christina Leung said the RBNZ could probably afford to stop after a hike this week.
"The key question is whether it's done enough in terms of policy tightening to turn inflation back towards its 1-3 percent inflation target band ... we think they'll then pause and wait to assess the impact of the tightening, given the lag of the rate rises we think there's more economic softening to come."
ASB chief economist Nick Tuffley said the RBNZ would acknowledge but disregard the impact of the recent North Island storms and also the global banking wobbles, and continue with the tough talk.
"The statement's policy conclusions are likely to reiterate the following: that 'the OCR still needs to increase'; that 'monetary conditions need to tighten further'; and that the Monetary Policy Committee 'remains determined to achieve its Monetary Policy Remit'."
He expected a further 25 basis point rise in May to emphasise the RBNZ's determination and just as importantly limit any expectations of rate cuts.
"It will want to send the message that rates will stay high for some time ... it's a challenging balancing act but as you move to go on hold you still have to talk tough as well."
Tuffley expected rate cuts possibly around May next year depending how quickly inflation pressures eased.
