BNZ economist Craig Ebert said the speech by Mr McDermott was expected to be designed - both in content and timing - to dampen any market excitement ensuing from yesterday's soft-looking Consumer Price Index, the official measure of inflation.
The speech could provide more exposition on the central bank's thoughts than it would be able to achieve with its one-page of comment from the official cash rate review on April 30.
''In many ways, the speech will serve as a mini monetary policy statement. Don't miss it,'' Mr Ebert said.
Statistics New Zealand figures released yesterday confirmed that March's Consumer Price Index reached a low point for headline inflation.
The more important pointers were on core inflation and those were arguably firming.
March quarter CPI fell 0.3%, dragging down the annual rate of inflation to 0.1%.
The Reserve Bank's inflation target is between 1% and 3%.
Craigs Investment Partners broker Peter McIntyre said the time for the Reserve Bank to act and cut its official cash rate was now.
Otherwise, the risk of deflation, instead of inflation, would hurt the economy.
''Inaction of any sort is not an option. The Reserve Bank has been concerned about the high currency and high house prices, which are strictly not in its mandate.
"It is looking for some signs from the Government action will be taken on the migrant-driven housing prices in Auckland and Canterbury.''
China had been exporting inflation for years but a slowing in global demand meant that was no longer happening, Mr McIntyre said.
All reserve banks had been taking action because no-one was was prepared to take the ''hard hit'' anywhere in the world.
Lowering the OCR in New Zealand would provide economic stability, even if it pushed up house prices further.
At some point, the market would reach its peak and no-one should expect to receive 20% annual increases in Auckland prices forever, he said.
''Act now. It is better to have inflation than deflation.''
Mr Ebert said although the result was soft, and below market expectations, it was not as soft as the Reserve Bank had been expecting which was for a 0% annual rate of inflation.
Council of Trade Unions economist Bill Rosenberg called on the Reserve Bank to cut its official cash rate next week from the current 3.5%.
The Australian Reserve Bank has an official lending rate of 2.25% and is expected to cut to 2% next month.
''Despite the Reserve Bank holding its official cash rate at 3.5% since June last year, the retail banks are competing down mortgage interest rates so the Reserve Bank is not succeeding in holding lending rates up to calm house prices.
"Instead, it is creating huge costs on the export sector of the economy.''
Real interest rates - taking account of expected very low inflation - were moving back to their late-2008 levels and higher than they were through most of the early 2000s, he said.
Those were costs for businesses as well as home owners.
The Reserve Bank board needed to be challenged to do its job of encouraging more innovative policy or be replaced by a group with more courage.
Instead, the board was helping to raise the value of the New Zealand dollar against most currencies, especially the Australian dollar.
The high exchange rate with the Australian dollar was more a reflection of the interest rate differential with Australia than the relative health of the economies, Mr Rosenberg said.
Deflation
A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment, since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop in prices to a minimum.
