Bad news for anyone trying to work out what to do with their home loans - the latest tranche of economic data has prompted an about-turn so sharp in interest rate markets that one bank says it will keep chiropractors in business.

Markets had been pricing in an official cash rate cut from the middle of this year.

The sharp fall in wholesale rates had prompted calls for banks to cut home loan rates more aggressively.

But now the market has changed its mind.

ANZ said on Friday that it now expects the official cash rate to increase twice more this year, a sharp change from an earlier prediction that there would be a cut in August.

Wholesale markets have had a similar change of heart.

ASB chief economist Nick Tuffley says at the start of last week, financial markets were pricing in OCR cuts from as early as July.

Now they are fully pricing another hike by May, although still predicting that cuts will start soon after.

"With this degree of whiplash, employment for chiropractors seems sound."

The one-year swap rate on Monday was 5.71 per cent up from 5.33 per cent on February 5.

"According to the market pricing, there's now a positive probability that the Reserve Bank will lift the OCR this month, although it's still seen as less likely than no change," says Inometrics chief forecaster Gareth Kiernan.

"Beyond the current quarter, market pricing is still for an OCR of 5.5 per cent at the end of the June quarter, easing to about 4.75 per cent at the end of December.

"Essentially the whole profile of the curve from June onwards has been pushed up by about 20-25 basis points.

"In my view, the market had got way ahead of itself in terms of anticipating cuts by the Reserve Bank."

Nick says it was the stronger-than-expected wage growth data last week that changed many forecasts.

"The fact it didn't really come down much is quite something.

"It's normally not subject to a lot of noise so that's suggestive that there is still a fair bit of wage pressure in the system.

"That was one catalyst that had people thinking that there was a risk that rate cuts would happen later than predicted, then on Friday when ANZ changed its view to forecast rate hikes over the next two meetings, that further pushed [wholesale rates] higher."

He says markets had probably been too "gung ho" with the prediction of rate cuts.

The market swing had led to a big lift in wholesale rates, particularly at the shorter end.

"You can get a lot of volatility while markets work through are we getting rate cuts, are we getting rate hikes, we don't know.

"It's likely to bounce around a bit on data, speeches.

"There's the potential for a lot of volatility in rates until we get a bit more clarity."

He says even though the rates market had swung to price in an increase, it was still pricing in a cut shortly afterwards.

"It's basically saying 'yeah sure, the Reserve Bank might hike rates in the short term but they'll go into reverse pretty quickly'.

"Fundamentally rates need to go lower fairly soon but it's also trying to cover the risk that the Reserve Bank might raise rates in the immediate future."

Borrowers should know that rates were still likely to be near the peak, he says, although there might not be a sustained fall soon.

"Be prepared for volatility.

"It is a time thing.

"Inflation is getting under control, it's just a question of how quickly it happens."

He says rates were higher than they were likely to average over the next few years.

BNZ chief economist Mike Jones did not expect another increase.

But he says what the markets thought would matter.

"If the Reserve Bank is sitting on the fence, in a do we or don't we state, then if the market is pricing in a tightening the bank is much more likely to pull the trigger.

"We'll be keeping a very close eye on this as we get closer to the decision day."

- Stuff/ Susan Edmunds