The ASB Business Weekly report says suggestions were aired last week that cutting the OCR could push the NZ dollar higher, through lower interest rates exacerbating the domestic-led economic recovery in a repeat of 2003.
"However, we don't think the RBNZ will be running too much risk of inflaming the housing market further by cutting the OCR," it says.
"At best we see a lower OCR slowing the upward momentum of interest rates rather than triggering drops, as well as denting the NZ dollar for a period. Doing so may make life a little easier for some NZ businesses."
ASB says interest rates remained steady over the previous week, with swap rates dipping earlier in the week, but recovering later on - in step with Australian markets.
The latest ANZ Market Focus report suggests the market has become caught up in the excitement over the Reserve Bank of Australia's next move, with changes in NZ rates going too far.
"...Given that the RBNZ will not be hiking in January next year as implied by overnight indexed swap (OIS) pricing," it says.
It believes the yield curve could be due for a corrective move downwards this week, to reflect our diverging economic fundamentals from Australia.
It believes fixing at current levels will lock borrowers into rate hikes that are "priced in too early and aggressively".
"Nothing has changed to alter our view that the RBNZ is on hold until the end of next year," it says.
The Market Focus report also pours cold water on speculation that a housing market shortage will lead to another mini housing boom. It does not believe a shortage exists, but says even if it did, "we struggle to see the link in reality".
The Westpac Weekly Commentary highlights the fact retail sales "held their ground" in June, with the housing market also continuing to make gains.
It estimates that during the housing market correction of the last two years, homeowners have switched from a peak equity withdrawal of $5.6 billion in the year to June 2007, to a maximum injection of $5.9 billion in the year to March 2009.
It continues to recommend fixing for six months to a year, saying that borrowers should reduce the uncertainty implicit in a shorter fix by repaying more than the minimum on their mortgages while interest rates are low.
Meanwhile, the BNZ Capital Economy Watch report released on Friday comments that policy officials need to keep supporting the emerging signs of recovery.
"The signs of recuperation, even in the household sector, should not be cause for an RBNZ tightening cycle beginning as soon, or as aggressive, as the market is now pricing. Not even close," it says.
