The RBNZ's determination to get ahead of inflation will likely see it deliver a 5.5% OCR peak by mid-year, in the opinion of economists at Westpac.

The RBNZ is grappling with an uncertain environment

“We now expect a peak of 5.5% in the OCR this year, up from our earlier forecast of 5.25%.” 

“The Reserve Bank remains committed to bringing inflation back under control and sees the risks as being to the upside of its already-strong forecasts. As a result, we expect that it will carry through with its plans, at least in the near term.”

“However, the RBNZ also recognises the downside risks to activity in the years ahead, as higher mortgage rates squeeze households’ spending power.”

“Cyclone Gabrielle will add to medium-term inflation pressures at the margin, but the scale of the impact is hard to gauge at this early point.”