Will Reserve Bank Governor Adrian Orr hike rates even further?

Most economists believe Reserve Bank Governor Adrian Orr won't inflict more mortgage pain on homeowners in the first interest rate decision of the year on Wednesday. 

But nor will he deliver any relief, despite inflation having dropped to 4.7 percent from its peak last year of 7.7 percent.

Currently the official cash rate (OCR) is at 5.5 percent, having been at that level since May 2023. 

While economists at the major banks mostly agree Orr and his monetary policy committee will not change the rate, New Zealand's biggest bank is still predicting a different outcome - an interest rate hike. 

ANZ's chief economist Sharon Zollner acknowledges the bank is "very much in the minority" in expecting a rise to 5.75 percent. 

In an economic note, she said it appreciates the arguments waiting for further evidence but not hiking is "a risky option, given clear evidence of sticky inflation pressures".

Westpac, BNZ, ASB and Kiwibank all forecast no change to the OCR - but expect a potential rate cut in November this year. 

The current Reserve Bank OCR track doesn't predict a cut in interest rates until late 2025. 

Kiwibank argues the country can afford to do it earlier. 

The economy has contracted and may record a double dip, albeit shallow, recession, the bank said. 

"Households have been hit by a cost-of-living crisis, a falling housing market and a rampant rise in interest rates. Consumption is weak."

All banks will be keenly watching the language of the monetary policy statement to see the Reserve Bank's thinking on how well inflation is being tamed. 

The statement will be delivered at the same time as the OCR decision is released at 2pm on Wednesday.