The Reserve Bank of New Zealand (RBNZ) is expected to hike the cash rate by 25 basis points to 2.75% at its September meeting, reaffirming its tightening bias, Bank of New Zealand (BNZ) said in a Monday note.

The peak in the cash rate is expected to be around 3.3% in the September quarter 2027. Market pricing implies split expectations of a 25-basis-point hike in either October or December but not both months. The bank expects rate hikes at both meetings.

If the central bank were to potentially pause in either October or December to assess the impact of monetary policy, it would be likelier in December, by which time the cash rate would be sitting at the RBNZ's view of long-term neutral.

It is forecasting a 0.2% decline in production gross domestic product for the June quarter but a small increase in the expenditure-based measure.