The Reserve Bank has been accused of using ''weasel words'' as it sticks to its mantra that the official cash rate will remain unchanged at 2.5% until the end of the year.
BNZ head of research Stephen Toplis said the ''weasel words'' were not entirely consistent with the central bank's rate track, which showed a first rate increase sometime between June and September next year.
''We will stick with our view that the first hike in rates will be in the first quarter 2014, and most likely in March.''
As the Reserve Bank stated, ''the extent of the monetary policy response would depend largely on the degree to which the growing momentum in the housing market and construction sector spilled over into inflation pressure'', Mr Toplis said.
Continued house price inflation would support domestic demand through wealth effects - both actual and perceived - and increased construction sector activity would flow through into input prices through building materials and wages.
Neither of those impacts was expected to be particularly dramatic but sufficient to require a normalisation of rates, he said.
There was no mention in the OCR review yesterday of the prospective changes to the loan-to-value ratios (LVRs) regime the central bank was discussing.
Mr Toplis said that should come as no surprise. The central bank would want to be ''very clear'' to differentiate between prudential and monetary policy actions and would only mention prudential policy in its monetary policy missives when they affected the interest rate track.
Market reaction came as a surprise. The New Zealand dollar was up 0.5% against both the United States and Australian currencies soon after the announcement.
Reserve Bank governor Graeme Wheeler noted the persistent house price inflation in Auckland and Canterbury.
The Reserve Bank did not want to see financial or price stability compromised by housing demand getting too far ahead of the supply response.
The dollar remained high and continued to be a barrier for the tradeables sector of the economy, he said.
Inflation was expected to trend upwards through the mid-point of the 1% to 3% target band as growth accelerated in the coming year, Mr Wheeler said.
