The pressure is building for the Reserve Bank to lower the official cash rate to 2% despite most economists saying the central bank believes 2.5% will be low enough to generate inflation of 2%.
A speech yesterday by Reserve Bank governor Graeme Wheeler indicated the central bank was not yet done with its OCR easing rate cycle.
However, Westpac chief economist Dominick Stephens said the speech also strongly suggested the OCR cut would not occur at the October review in two weeks time.
''It seems unlikely the governor would go out of his way to make a relatively hawkish speech, including references to moving the OCR slowly and keeping powder dry, if he thought the OCR was likely to be reduced in October.''
Mr Stephens said he had no reason to alter his forecasts of an OCR hold in October and a cut in December.
Looking beyond the next interest rates decision, Westpac was still comfortable with its view the central bank would need to cut the OCR by more than markets currently anticipated and retained its forecast of a 2% low point for the cash rate, he said.
The consumer price index, the official measure of inflation, will be released tomorrow with expectations of a subdued figure of between 0.1% and 0.2% for the September quarter and between 0.2% and 0.3% for the year.
The Reserve Bank has an inflation target of between 1% and 3%.
ASB chief economist Nick Tuffley said looking ahead to 2016 and 2017, he believed inflation would struggle to sustain a pace close to 2% at an OCR setting of 2.5%.
''In particular, we are sceptical tradeable inflation will be anywhere near as strong as the Reserve Bank is banking on off the back of the fall in the New Zealand dollar.
''Moreover, the dollar is rebounding slightly rather than falling further.''
For the October meeting, the Reserve Bank was expected to ''remain comfortable'' a 2.5% [rate] would be low enough to hit 2% inflation for the first time since 2011, after the GST increase, he said.
