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Growing fears of recession, both here and around the world, have spooked markets and pushed commodity prices down.
That's bad news for the economic growth outlook, but it's good news for those watching for an inflation peak - and an end to interest rate hikes.
It's even got some punditspicking that mortgage rates might not need to rise as high as forecast.
But don't expect to see the Reserve Bank soften its stance when it delivers its Monetary Policy Review this Wednesday (2pm).
Economists expect another 50 basis point hike - the third in a row - taking the official cash rate to 2.5 per cent.
Most still expect the RBNZ to keep hiking this year to an OCR peak of 3.5 per cent, even as the housing market and other parts of the economy cool.
It was more or less "a case of hitting the repeat button" this week, BNZ head of Research Stephen Toplis said.
"That said, we are strongly of the view the outlook for the real economy has deteriorated relative to that which the RBNZ based its May rate track on," he said.
"We think that had the RBNZ needed to publish a full rate track with this release then there would have been considerable discussion about the possibility of moderating the pace and scale of the tightening cycle."
In what she described as "one of the easier decisions" the Reserve Bank has had to make, ANZ's Sharon Zollner said the "data-flow since the May Monetary Policy Statement had not provided any compelling reason to diverge from that strategy."
However, she acknowledged the global negativity which had helped shift market expectations back in to line with the RBNZ.
"Recently, hard-landing fears have started to dominate, impacting New Zealand markets too," she said.
"The two-year swap rate has been as high as 4.55 per cent; it currently sits at round 3.90 per cent."
Sentiment was weakening and speculation about a downturn was mounting, ASB's Nathaniel Keall said.
Reserve Bank Governor Adrian Orr during his press conference in Wellington after the bank increased the Official Cash Rate (OCR) by 50 basis points to 2 per cent May, 2022. Photo Mark Mitchell
"But the starting point for the labour market is very tight and inflationary pressures remain lofty."
The "least regret" for the RBNZ was to continue front-loading its policy tightening, he said.
"What's more, it's easier to loosen conditions further down the track if necessary than to get bring inflation expectations back down to Earth after they've run away from you."
Still, the shift in market outlook and expectations the OCR will peak later this year have some talking about an imminent peak for mortgage rates - over longer fixed terms at least.
Ben Udy, at Sydney-based Capital Economics, sees the RBNZ hiking the OCR aggressively to 3.5 per cent by the end of this year.
But he believes it will be cutting rates by next year as the housing downturn and recessionary trends deepen.
Median house prices fell 3.8 per cent in May and were now down 7.5 per cent from their peak in November last year, he noted.
"Rate hikes are clearly a huge drag on sentiment. Both consumer and business confidence is currently weaker than at the height of the Global Financial Crisis. That would typically be consistent with a sharp decline in GDP," he said.
"But we know from timely activity data that GDP is not faltering as sentiment would suggest. For example, electronic card transactions have risen by 8 per cent over April and May after falling in [the first quarter]."
While the housing downturn wasn't much of a concern to the RBNZ right now, it would become so before long.
"We now expect prices to fall by 20 per cent from their November peak. That's largely a reflection of the increase in the OCR we are expecting."
"Between easing inflation, rising unemployment and subdued growth, we doubt the RBNZ will be enthusiastic about raising rates further next year. In fact, we have pencilled in two rate cuts in the second half of next year as GDP growth slows to a crawl."
Independent economist Tony Alexander subscribes to that outlook and makes the point that it means fixed mortgage rates for terms of two to five years are now at, or near, their peak for the cycle.
"I still pick [an OCR] peak of 3.5 per cent per cent but wouldn't rule out the rate actually topping out at my original predicted peak of 3 per cent," he wrote in his latest weekly report.
Tony Alexander. Photo / Fiona Goodall
It was notable that some banks had cut their two-year fixed mortgage rates last week because the two-year swap rate which they borrowed at, to lend to customers, had fallen by over half a per cent in the past three weeks, he said.
"I would not rule out further small rises from here if economic data surprise on the strong side while central banks are still pushing their cash rates higher."
"But any rises will likely be minimal and that just reinforces the fact that fixing long now would involve fixing at or near the top of the rates cycle – that is not a good idea."
