The Reserve Bank (RBNZ) will likely pause interest rate increases next week, according to economists, marking the end of months of aggressive hikes to try and bring inflation under control.
It decided to hike the official cash rate (OCR) by 25 basis points to 5.5 percent at its May meeting, indicating that would be the peak.
The RBNZ began its aggressive tightening cycle in mid-2021 and next week would mark its first pause since then.
Inflation slowed to 6.7 percent on a yearly basis in March from 7.2 percent, still well above the RBNZ's target range of between 1 and 3 percent. But, with a weak economy and still-declining house prices, expectations for the monetary policy committee to hit pause when it meets on Wednesday remain.
"We are likely to see actual headline inflation continue to come down over the next wee while and, when we get some [consumer price index] figures out later on this month, we'd expect to see a 5-something percent figure instead of the 6 that we still have," ASB chief economist Nick Tuffley said.
It would be a slow process, however. Tuffley said the RBNZ wasn't expecting inflation to fall below 3 percent until the middle of next year.
Other major New Zealand banks including ANZ, Westpac and Kiwibank were also forecasting a pause next week.
"We expect the RBNZ to keep the OCR unchanged at 5.5 percent at next week's monetary policy review. Anything else would be a massive surprise," ANZ said in its preview dubbed 'Texas Hold'em'. "We continue to see the balance of risks tilted towards the RBNZ eventually having to do more but it's not today's story.
"However, we continue to expect a picture of relative resilience versus the RBNZ's forecasts. While the economy is certainly slowing markedly as tighter monetary policy bites, overall demand will be supported by the migration surge, the housing market lifting itself off the floor (albeit only to its hands and knees) and fiscal stimulus."
