Economists, including ASB chief economist Nick Tuffley, are slowly starting to push out their expectations of a increase in the official cash rate (OCR), from 1.75%, from late next year into early 2019.
``The balance of recent events points to the Reserve Bank sounding more cautious, including deferring its forecast OCR hikes,'' Mr Tuffley said.
Last week, Mr Tuffley shifted the ASB's view on the OCR to expecting the first rise in February 2019, it previously being in November 2018.
Most of the key events since the last OCR review in June had indicated a lesser degree of inflation pressure, including the New Zealand dollar being stronger, the consumer price index (inflation) being weaker than the central bank expected, and its estimate of the neutral interest rate edging down.
Last month, inflation figures from the consumer price index caught the Reserve Bank and economists by surprise, with zero movement in the quarter to June.
Expectations were for an increase of between 0.1% to 0.3%.
The annual inflation rate had slipped to 1.7%. The Reserve Bank's preference was 2%, midway in its 1% to 3% target range.
Mr Tuffley said when the review was released on Thursday, it was ``likely'' the Reserve Bank would ``tweak'' its OCR outlook slightly.
``We expect the Reserve Bank to show OCR hikes starting around early 2020, three to six months later than in its May policy review, a reflection of the overall downward shift in inflation pressure from other sources,'' he said.
There was even some prospect it could flag the potential for an OCR cut, Mr Tuffley said.
The inflation implications were that the low OCR, now at 1.75%, was not quite as stimulatory as the Reserve Bank had been assuming.
``The shift isn't much, but it is yet another reason for the Reserve Bank to reassess whether the OCR needs to remain on hold for longer,'' he said.
ANZ chief economist Cameron Bagrie does not expect central bank governor Graeme Wheeler to ``rattle the cage'' in what will be his final cash rate decision and said the tone of the accompanying statement, projections and press conference would reinforce the bank's ``cautious, watchful and neutral stance,'' BusinessDesk reported.
Mr Bagrie also noted a case could be made for moving to an easing bias as core inflation had softened, activity growth was sub-trend, housing market momentum had slowed, financial conditions had tightened, the New Zealand dollar had strengthened, and global inflation had rolled over.
However, he was not expecting an outright easing stance but something on the ``dovish side of neutral''.
Mr Bagrie also said the implied rises within the bank's forecasts ``should be removed''.
BNZ head of research Stephen Toplis noted that a ``purely mechanistic approach'' would now argue for a cut in New Zealand's cash rate given the balance of economic data, including lower-than-expected inflation, the spread between the cash rate and lending rates and the softer housing market.
However, Mr Toplis said a cut was unlikely given the economy was sufficiently capacity constrained and growing well enough that it needed no extra stimulus from the central bank. But the ``warning signs'' could not be ignored, he said.
Westpac chief economic Dominick Stephens also expected the central bank to be firmly on hold, and said one area in which it was likely to be ``more forthright'' was the exchange rate.
According to Mr Stephens, the recent rise in the dollar to US74c seemed out of proportion with New Zealand's economic conditions and it ``could even go so far as to say that if the exchange rate remains too high, monetary policy would have to be more accommodative than otherwise - terminology that it has used in the past.'' - Additional reporting BusinessDesk
