The Reserve Bank of New Zealand is expected to make no change to the official cash rate on May 27, leaving it steady at 2.25%, with a 50/50 chance of a rate hike in July, ANZ said in a note on Wednesday.
The data since April has been a mix of a stronger starting point, as well as the early signs of the impact on confidence and spending.
Fourth quarter gross domestic product was weaker than the February forecast. It showed the economy grew 0.2% quarter-over-quarter, versus the central bank's forecast of an 0.5% increase. Meanwhile, first-quarter consumer price index inflation was stronger than the central bank's expectations, with headline inflation of 3.1% rather than 3%.
House prices may have capitulated in April, consistent with anecdotes of a sudden market stop. The performance of manufacturing index and performance of services index are both in contraction territory. ANZ card spending data shows a decline in discretionary spending as customers deal with a sharp increase in necessities and face more economic uncertainty.
It won't be obvious what the right thing to do is in the wake of the oil shock. The best the monetary policy committee can do is try to keep in balance the risk of causing unnecessary pain now or risking unnecessary pain later.
The analysts added that the market will be sensitive to any messaging, implying only limited tightening, the bank said.