The market now sees a peak above 4.5 per cent.
That shift has been driven by ongoing tightness of the local labour market and US dollar strength - which is putting downward pressure on the kiwi (and other currencies).
The weaker kiwi lifts the costs of imports making inflation even harder to curb.
Retail mortgage rates have been creeping up in the past few weeks.
This week the RBNZ just releases a short Monetary Policy Review (rather than the full statement) which means it won't deliver new economic forecasts.
So all eyes will be on the language and tone of the brief commentary that accompanies the rate decision this week.
Markets have priced in an outside chance of a 75 basis point hike - matching the US Federal Reserve.
But economists don't see that as likely with the RBNZ still waiting to see local consumer price index inflation data later this month.
"We expect the RBNZ to repeat that the OCR will continue to rise "at pace", and to signal a higher peak for this cycle," said Westpac chief economist Michael Gordon.
"[It] may say that the committee anticipates a higher OCR path than what was
projected in the August statement."
Westpac last week shifted its forecast peak for the OCR to 4.5 per cent, following moves by ASB and the ANZ - which see it peaking at 4.25 and 4.75 respectively.
"The key messages this time should remain similar to August's," said ASB chief economist Nick Tuffley.
The RBNZ should indicate it will keep lifting the OCR until it is "confident there is sufficient restraint" in place, and it is "resolute" in meeting its remit, he said.
"Beyond October, we expect a further 50bp increase in November and a final 25bp lift in February. Market pricing is for an even higher peak than the 4.25 per we are forecasting, which is appropriate given the skew of risks."
BNZ head of research Stephen Toplis also sees another 50 basis point hike coming in November and has moved his forecast peak to 4.25 per cent.
"The big unknown for us is how does the RBNZ think it should respond to the recent surprising aggressiveness of the Federal Reserve?" he said.
"The Fed is now suggesting the US cash rate could move into a 4.50 per cent to 4.75 per cent band."
This made it harder for the RBNZ to keep its cash rate peak near 4 per cent.
"Were it to do so this would put even greater downward pressure on the New Zealand dollar."
But the RBNZ should still play its cards close to its chest, he said.
"We think that, in the current environment of heightened uncertainty and the increasing likelihood of a global recession, the RBNZ should do nothing to suggest its view on the terminal cash rate of 4.25 to 4.50 per cent has been lifted."
Despite being the most hawkish in outlook, ANZ's Sharon Zollner echoed that view suggesting there has been no significant local data to warrant any change in tone.
At Kiwibank, the economists are holding their nerve and retaining a 4 per cent OCR peak, although chief economist Jarrod Kerr acknowledges the risks are "clearly tilted to even more tightening".
"We believe the RBNZ is gaining significant traction in their monetary tightening," he said.
"Many mortgagees are rolling off very low rates and on to much higher rates in the next 3-6 months."
Mortgage rates
Mortgage rates have moved upwards across the banks in recent weeks with a sharp increase in wholesale rates.
ANZ was the first to move on September 21, increasing rates by between 26 and 35 basis points. Its standard two-year rate is now 6.35 per cent while its special rate - for borrowers with at least 20 per cent equity - is 5.75 per cent. Both have increased 30 basis points.
Westpac, ASB, BNZ and Kiwibank all followed suit with rate rises last week. BNZ is the cheapest of the major banks with its two-year special rate at 5.59 per cent but it is the smaller banks and Chinese bank ICBC who have held off increasing rates the longest hoping to scoop up customers from the majors.
SBS is offering 5.29 per cent over two years while TSB has 5.49 per cent. ICBC is the lowest at 5.25 per cent.
- additional reporting Tamsyn Parker
