New Zealand's largest bank is predicting interest rates will have to rise much further than previously forecast

ANZ is now predicting the official cash rate will increase to a peak of three percent over the next 15 months - up from 0.75 percent.

Previously it had forecast a peak at two percent.

Chief economist Sharon Zollner says the move in the OCR will likely be painful.

She says given the current level of house prices and household debt, banks have to do what's needed to bring inflation down.