Dr Bollard's speech was seen as a broad hint that he would raise the official cash rate (OCR) in June, although he never put a date on the first rise.
A mid-year rise for the OCR is almost certain but Dr Bollard still managed to avoid saying just when the first rise in more than a year would be.
In a speech to the Otago and Southland zones of Local Government New Zealand, in Dunedin, he used a truck driver analogy to explain his current thinking about official interest rates.
"Our foot is strongly on the accelerator. Over coming months we expect to reduce the pressure on this pedal, but in effect to keep some throttle going.
"Truck drivers know they must reduce acceleration long before the corner. We are not talking about tightening policy yet. We do not expect to have to touch the brake pedal for some time."
So what does that mean?
Financial markets expect the Reserve Bank to begin raising the official cash rate around the middle of the year and continue to do that in small steps for some time.
Dr Bollard said that was broadly in line with the central bank's views as outlined at last week's OCR review.
However, the timing and pace of returning the OCR to more normal levels would ultimately depend on economic developments.
Both markets and the Reserve Bank foresaw that the official cash rate would not need to rise as far in the current cycle as it did in the last one.
"But a final caution: recovery so far has been full of surprises. There will be more to come."
New Zealand had been fortunate in some respects, allowing most of the crisis of liquidity and guarantee measures to be terminated, he said.
Conventional monetary policy would now guide the stages of the recovery.
The country was emerging from the crisis with some reconstruction of its external deficits as a result of strong exports, weaker import growth, suppressed domestic profits and some consolidation on balance sheets, Dr Bollard said.
But the domestic sector was seeing a more fragile recovery, with business bruised but not permanently scarred. It was behaving very cautiously, still not looking to invest in plant and equipment or re-employ staff.
"Banking sector credit data continues to be extraordinarily restrained. Whatever the explanation, we certainly wish to see credit available for all sound business ventures."
In the household sector, there had been only a soft pick-up in house prices, new building and sales. Householders were building up savings and reducing debt.
"The stage is set for the bank to influence the pace of recovery through more conventional discretionary monetary policy," Dr Bollard said.
Forsyth Barr broker Tony Conroy said the dollar rose against the Australian, United States and British currencies as traders took Dr Bollard's comments to mean that interest rates were on the rise, and soon.
The NZX-50 was down, but so was turnover as investors watched and waited.
A few people had panicked and sold out, but with turnover about half of a normal Thursday, it was a sign that investors were waiting for the Greece situation to further unfold, he said.
The European Central Bank was meeting overnight, New Zealand time.
While it is expected to keep its official interest rates unchanged at 1%, it is expected to try to assure markets that it can prevent the debt crisis spreading.
Markets were also heartened by falling unemployment.
