"We are still feeling our way through a thick fog, in unchartered waters, that only the benefit of much more time will make clear," it says.
It suggests that while "everyone and their dog" expects the Reserve Bank will leave the Official Cash Rate (OCR) at 2.50% on Thursday, the bank will "stand its ground amid overly excited markets" and reiterate its cautious tones. BNZ Capital is also hopeful it might continue intimating that it expects rates will be kept "at or below" the current level until the latter part of next year.
While most believe a change in the OCR is unlikely, the ASB Business Weekly suggests now would, in fact, be a good tactical time to make a cut, particularly with markets implying increases from early 2010.
However, it says that for that to happen, the RBNZ would need to believe that further stimulus is needed; accept it has lost its ability to push short-term rates lower; but still believe that an OCR cut might still have some wider effect. It points out that while there are many positive signs in the economy, the strong NZ dollar is undermining the economic outlook.
In contrast, this week's ANZ Market Focus is hopeful that conditions have improved enough that the RBNZ will be able to put aside its easing bias for now.
"The economy looks to have found a floor," it says.
"But there is still uncertainty over the outlook, speed of recovery and structural challenges to warrant keeping the OCR low for some time."
It believes the RBNZ will keep the OCR at current levels well into 2010 and continues to favour a borrowing strategy of floating rates or a series of short fixes.
Westpac's Weekly Commentary also suggests that interest rates have "bottomed" and are likely to trend higher over the coming years.
"Although the RBNZ's intention to keep the OCR low suggests little pressure for short-term rates to rise any time soon," it says.
However, it believes that the RBNZ is preparing the ground for interest rates to rise in coming years, to potentially mitigate any renewed house price inflation and drop in savings rates that might occur to help prevent a return to the borrowing and spending ways of our recent past. It says such an interest rate increase could occur through OCR hikes; increased use of prudential regulation; or market forces.
