The chances of a rate change at this meeting are very low, so forward-looking language and, above all, new economic projections will drive the market reaction. The November rate path showed a first hike only in 2Q27, but that assumed headline inflation falling to 2.2% in the second half of 2026. A revision higher in inflation numbers would make a strong case for bringing forward the expected rate hike.
In our estimates, inflation will not fall below 2.4% at any point this year, and we currently expect a 1Q print around 2.7 to 2.8%, well above the RBNZ’s 2.3% estimate. If the RBNZ staff are using similar assumptions, we could see a materially higher revision in inflation and the rate path.
Even if that doesn’t fully align with the roughly 40bp of tightening priced in for year‑end, simply signalling a first hike in 1Q27 would likely validate current market expectations, and could even prompt investors to price in a second hike for 2026. The recent move by neighbouring Australia to lift rates to 3.85% may also be adding a touch of marginal hawkish pressure.