Same data, opposite conclusions
The hold camp centres on near-term inflation relief. Westpac now expects annual inflation to peak at around 4% in the June quarter, down from a prior estimate of 4.5%, easing to 3.5% by year end — notably below the RBNZ’s May projection.
ASB’s Jane Turner, senior economist, made a similar revision, forecasting a CPI peak of 4.1% in Q2 before dropping to 3.4% by end-2026.
Kiwibank argues the oil shock has caused enough demand destruction to justify patience — “keeping interest rates at accommodative levels for the time being is the RBNZ’s best bet at helping the economy recover,” its economics team wrote.
BNZ’s Stephen Toplis reaches the opposite conclusion in BNZ’s Markets Outlook. BNZ’s most distinctive argument is not about neutrality but about the nature of inflation itself. As oil prices fall and household real incomes recover, spending is likely to rebound — shifting inflation from supply-driven to demand-driven.
In that scenario, the RBNZ faces an even harder task. “Take the rate increases away and inflation forecasts would have been higher,” BNZ noted. More broadly, BNZ is “strongly of the view the cash rate needs to get back to neutral relatively quickly to ensure stimulatory monetary policy does not add to inflation,” and BNZ’s view is that the RBNZ would “lose some credibility were it not to raise rates in July” given half the committee had wanted a hike at the previous meeting.
