Interest rates are set to rise again as the Reserve Bank delivers its April Monetary Policy Review.
Economists remain divided on whether the Reserve Bank will - or should - lift the official cash rate by 0.25 or 0.50 basis points on Wednesday.
Nobody is debating whether it will rise from 1 per cent, where it sits now.
Ultimately the decision may come down to how much underlying strength the RBNZ sees in the economy and therefore how much anti-inflation medicine it can take before nasty side-effects kick in.
ANZ economists remain the most hawkish, sticking to their earlier call that a 50 basis point hike is needed this week, and again when the Reserve Bank meets in May.
"The RBNZ has a big job to do to rein in runaway inflation, and the sooner they rip into it, the lower the economic cost is likely to be," says ANZ chief economist Sharon Zollner.
But there are "no low-risk policy choices" for central banks right now, she warns.
ASB and BNZ economists still lean towards a 25 basis point hike, even though they say it is a close call.
Markets have priced in the odds at about 50/50.
"Since we can't split the difference, we have opted for a 25bp hike and for the RBNZ to deliver an upfront assessment reiterating that the tightening cycle is still in its early stages," said ASB senior economist Mark Smith.
The RBNZ will emphasise that "follow-up 50bp hikes (notably in May) are still possible and that the OCR will need to move above neutral levels to achieve the RBNZ's objectives."
Smith said he thought the case for a 50 basis point hike looked more compelling in May, but for now ASB continues to forecast a series of 25 basis point hikes taking the OCR to a peak of 2.75 per cent in early 2023.
BNZ head of research Stephen Toplis also sees the calls as finely balanced.
"While we understand the argument for a more aggressive tightening than previously postulated by the Bank, we can also see a strong counter-argument for a more cautious approach," he said.
"Were the RBNZ to hike 50 basis points in April then we have little doubt the market would fully price a further 50 basis points for May, and most likely push the terminal rate through 4 per cent."
That would risk hitting consumer demand too hard, Toplis warned.
"While, realistically, it's a coin toss as to which way the RBNZ leans, we think it would be better to keep its options open," he said.
Toplis feels a further 25 point nudge in the cash rate might be the approach, accompanied by a stern warning that a more aggressive interest rate track will likely be forthcoming when it releases its May Monetary Policy Statement.
ANZ's Zollner argues that hiking harder and sooner is consistent with Reserve Bank Governor Adrian Orr's previously stated approach of "following the path of least regrets".
The biggest regret from this starting point "would be losing inflation-targeting credibility and seeing inflation expectations become truly unanchored," she said.
"Fixing that would require far higher interest rates, and very likely a deep recession and sharp rise in unemployment to solve - a la 1991."
Sydney-based Capital Economics is also picking a 50 basis point hike, noting that economic activity is starting to rebound post-Omicron peak and "evidence continues to mount that inflation is getting out of hand".
Westpac chief economist Michael Gordon lands on the side of a 25 basis point hike, but notes "the split of market opinion means that the RBNZ is probably going to rattle financial markets no matter what it does".
- The Monetary Policy Review will be published as a statement at 2pm on Wednesday. The Business Herald will have instant market reaction analysis of the rate decision through the afternoon.