ANZ bank is now predicting the Official Cash Rate (OCR) will rise two more times and stay up until this time next year.
Some commentators had tipped official interest rates to start falling this year, and some banks have trimmed their rates recently.
But ANZ said in a forecast today that it sees the OCR going up by 25 basis points in both February and April this year. That would take the official rate from the current 5.5% up to 6%.
The Reserve Bank of New Zealand (RBNZ) warned in its monetary policy statement last November the OCR "would likely need to increase further" if inflationary pressures are "stronger than anticipated".
In its RBNZ OCR Call Change report, released today, ANZ saw a "series of small but pretty consistent surprises in that direction".
The inflation rate announced in late January showed a continued fall, with Stats NZ saying the annual Consumer Price Index (CPI) increased by 4.7% for the December quarter, the smallest annual rise in over two years. That is still above the RBNZ's target of getting inflation down to between 1-3%.
ANZ called this month's decision whether to raise rates "a line-ball call".
"If they don’t hike in February, we think they will in April, unless we start to see meaningful downside surprises," the report read.
It noted the Reserve Bank's key task is to get inflation down to a sustainable 2% in the medium term.
"We just don't think the RBNZ Committee will feel confident that they've done enough to meet their inflation mandate. The buck stops there."
ANZ is predicting cuts to official rates will not kick in until a year from now in February 2025.
"From there, with the job done, the RBNZ is in a position to cut quickly. Of course, no one can forecast accurately out that far, but consistent with the RBNZ buying itself more assurance of getting the job done with these cuts, we are forecasting a faster series of cuts, still taking the OCR back to 3.5%, the RBNZ’s forecast horizon neutral OCR estimate."
The next OCR decision will be announced on February 28.
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