Economists are predicating the Official Cash Rate (OCR) to rise today, which would make it the tenth consecutive increase.
It currently sits at 4.2%, up from 3.5% last October.
Speaking to Breakfast this morning, Devon Funds' Greg Smith said he thinks the Reserve Bank (RBNZ) could hike the OCR by half a percent.
"They're looking to drive inflation down, its come down a bit but it needs to go lower and there will be inflationary pressures coming out of the cyclone and the flooding."
He said another option for the Reserve Bank is to reduce rates by a lesser amount, around a quarter of a percent.
"They could factor in a number of things, that yes inflation is going to go up short term, we've seen the tremendous damage to the crops, food producing regions, that's going to drive up food prices, homes are going to need to be repaired and rebuilt, that's going to drive up construction costs, infrastructure, insurance premiums are going to go up."
Smith said RBNZ could actually look beyond that.
"It's going to cost the economy billions of dollars, tens of billions plus, could actually tip the economy into recession."
Inflation is currently sitting at 7.2% and Smith says it needs to get to around 2-3%.
"They [RBNZ] want to get it lower but they don't necessarily want to sink the economy as well but I think they certainly are near the end of this rate tightening process."
He said it will be interesting to see how Cyclone Gabrielle will affect today's projections.
Yesterday, ANZ chief economist Sharon Zollner said she is not expecting the RBNZ "to go soft".
But she noted the details in January's quarterly consumers price index data "were not as bad as feared" and that "crucially, annual non-tradables inflation came in flat at 6.6%", below RBNZ's forecast of 7.0%.
The RBNZ is set to make at the announcement at 2pm today.
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