ASB chief economist Nick Tuffley said events since the March Monetary Policy Statement showed the Reserve Bank was not likely to get the stimulatory response to the OCR cut it would have hoped for.
Several benchmark lending rates had not fallen as much as the Reserve Bank clearly expected and the bank again ran the risk the dollar would hold up at a higher level than it had assumed, undermining the extent to which inflation would pick up in the future.
ASB economists now expected two final OCR cuts at the June and August Monetary Policy Statements.
The April meeting is a "very line-ball call'' for the next move.
The housing market's response to lower interest rates would remain a consideration for the "how much'' and "when'' factors, he said.
"We have reassessed how much work the Reserve Bank will have to do in order to comfortably achieve its inflation target and the answer is even more. OCR cuts risk having less impact on inflation than the Reserve bank would have expected.''
One factor was the lack of pass-through of the OCR to bank lending rates.
Rising risk premia for banks, particularly this year as European banks had come under pressure, had affected the costs of raising funds in international markets, Mr Tuffley said.
It was clear the Reserve Bank was not anticipating the fact only three of the major banks would pass on only 0.1% of its 0.25% OCR cut.
The second factor was the dollar.
Despite the Reserve Bank cutting the OCR earlier than expected, there had been minimal easing of monetary conditions through the dollar.
Last week, the United States Federal Reserve undid all the Reserve Bank's handiwork in shoving the dollar down, he said.
The Fed kept interest rates unchanged but dialled back its expectations for future interest rate increases by more than expected.
The promise of delayed action spurred a dip in the dollar to the point where the NZ dollar-US dollar cross ended the week higher than it was before the surprise OCR cut.
"It is clear the Reserve Bank can't expect the Fed to come to its rescue.''
But beyond the Fed, continued policy easings by other major central banks meant New Zealand remained a place of relatively high returns in a world of low and even negative interest rates.
Increasingly, the risks included the dollar continuing to hold up by more than both ASB and the Reserve Bank had been thinking, Mr Tuffley said.
Tradeable inflation, the main driver of higher inflation over the next couple of years, was likely to be more muted than anticipated.
All of that presented a creeping conundrum for the Reserve Bank as the dollar strongly risked continuing to blunt the extent to which tradeable inflation picked up.
"The dollar is a soaring eagle, not a sinking kestrel. For many years the dollar was outright strong across the board, compounded in 2014 by the Reserve Bank's tightening cycle.''
Although interest rates had fallen, and the dollar along with them, the challenge of super-easy monetary policy elsewhere remained, he said.
Not only did the dollar bounce back against the US currency but it also rebounded to varying extents against other major currencies.
Japan and the euro zone were taking further stimulus action.
The pound was under pressure and once again the Reserve Bank might face having to make an OCR decision in an environment where it was not getting the currency impact it was hoping for, he said.
