OCR preview: Westpac, ANZ say persistent inflation means more of the same from the Reserve Bank

Westpac is predicting no change to the Official Cash Rate (OCR) when the Reserve Bank announces its May decision next week.

It blames persistent inflation from stopping the popping of champagne corks to celebrate a rate cut. In fact, the bank doesn't see any significant change in the RBNZ's OCR projections, with any easing looking like "a 2025 affair".

A quarterly economic report from ANZ bank economists also predicts a cut won't happen until May, 2025.

"Key drivers of economic momentum such as housing, fiscal policy, net migration, and the terms of trade are increasingly playing ball in terms of the slowdown the RBNZ needs to see," the report stated.

"Here and now, inflation is still way too high, and upside risks remain. That's expected to keep the RBNZ in its watch, worry and wait stance for a while yet."

ANZ says drivers of economic momentum provide confidence of a slowdown.

Net migration remains high with Statistics NZ figures showing an annual figure of 111,146 for April, although this is steadily slowing from the peak figure of 139,000 in October last year.

ANZ says house prices appear to be tracking sideways although near-term prices are 'soggy', and while business and consumer confidence is 'dire' it hasn't translated into quite as dire economic outcomes as expected.

However, that could be changing as consumer pessimism now appears to be driven by heightened job insecurity rather than inflation.

Unemployment has now risen to 4.3 percent with the Reserve Bank expecting it to hit 5.1 percent by the early 2025.

ANZ says the RBNZ will need to keep the pressure on for a while to squeeze inflation back within the Reserve Bank's target band of 1-3 percent by the third quarter of 2024.