RBNZ expected to keep rates on hold

Kiwi mortgage advisers looking for surprises at this week’s Reserve Bank (RBNZ) decision may be waiting a while. Westpac’s February Client Pulse survey of 145 local and offshore clients shows almost unanimous support for leaving the official cash rate (OCR) on hold.

According to the survey, “An overwhelming 92% of clients expect the RBNZ will leave the OCR on hold at this week’s policy meeting.” The remaining 8% are evenly split between a hike and a cut – views Westpac chief economist Kelly Eckhold (pictured) describes as very much “marginal”.

Policy expectations are similar across domestic and offshore respondents, with offshore clients only slightly more inclined to see a hawkish RBNZ in the near term. Very few clients now expect cuts this year.

Hawkish tilt for 2026 OCR track

The stronger story for advisers lies beyond this week’s meeting. Most respondents think RBNZ will signal and then deliver at least some tightening by the end of 2026.

On the projected track, clients broadly expect the RBNZ to publish a 2.5% OCR profile at the end of 2026, with a clear upside bias. Eckhold notes that “clients expect that the RBNZ will follow through with projected rate hikes, with 75% expecting the OCR to end 2026 at 2.5% or higher.”

While around a third of clients expect the RBNZ to show the OCR at 2.75% or higher in its February Monetary Policy Statement, an even larger share – about 41% – think the actual OCR will finish 2026 at 2.75% or above. Offshore clients are more inclined to that hawkish view, while local clients are more comfortable with just one hike pencilled in.

Separately, NZIER’s Monetary Policy Shadow Board also backs an on-hold OCR at 2.25% now, but sees hikes starting in late 2026 as spare capacity is absorbed.

Inflation expectations edge higher

Underlying this shift is a clear lift in inflation expectations. Westpac reports that “83% of clients expect inflation will remain above 2% in two years’ time, up from 76% at the time of our previous survey.”

More respondents now see inflation outcomes closer to 2.75%–3% in two years, consistent with the recent 3.1% annual CPI result and persistent core inflation pressures. Westpac points to a “rolling‑maul of price increases” in non‑discretionary areas such as council rates, insurance, and utilities, with further large rises expected over the coming year.

Separately, ASB and Westpac economists warn of an upward drift in New Zealand inflation expectations, edging further above the RBNZ’s 2% midpoint despite contained headline forecasts.

Read the full Westpac report here for more information and insights.

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