The Reserve Bank is expected to move towards a more neutral stance but with cautious tones when it releases its official cash rate decision on Thursday morning.
The bank is expected to keep its cash rate at 2.5%, although the New Zealand interest rates market will still be reluctant to buy into the "rates on hold until late 2010"ANZ-National Bank chief economist Cameron Bagrie said yesterday he expected the Reserve Bank to remain committed to keeping rate low.
"We would not be surprised to see them refer to regulatory measures to strengthen this message.
"Though the economic projections will be revised slightly higher, as the governor [Alan Bollard] noted last week, there is a `hell of a long way to go'."
On the face of it, the rapid improvement seen across credit markets and the stabilisation in real economies argued for the removal of the extraordinary measures that had been put in place around the globe, Mr Bagrie said.
The demeanour across central banks remained circumspect as they appeared in no hurry on that front.
Even the Reserve Bank of Australia made it clear that its emergency rate setting was no longer appropriate, but it remained non-committal to when it would start to remove some of its accommodative stimulus.
"Clearly, there is still a lot of uncertainty surrounding the outlook and policy-makers are proceeding with caution," he saidAustralian Federal Finance Minister Lindsay Tanner yesterday rejected the notion official interest rates would be increased soon.
"The Reserve Bank is not indicating that," he told ABC Radio.
The central bank had indicated that "at some point in the future" rates could be expected to rise because they had been at emergency lows, he said.
The bank's official cash rate of 3% is at a 49-year low, but analysts are forecasting an increase possibly as early as October on the back of recent economic data.
Mr Tanner urged caution even though Australia's economic growth leads the world.
"Although recent growth figures have been better than expected they are still pretty modest," he said, adding that without the Government's stimulus spending there would be a risk of Australia sliding back to negative growth," he said.
Mr Bagrie said the "on hold until late 2010" message was likely to fall on deaf ears, capping any potential rally on a cautious tone.
The New Zealand market was likely to be heavily influenced by moves in Australia once again, particularly if the data flow built a case for the Reserve Bank of Australia to lift its rates before Christmas, he said.
New Zealand Manufacturing Exporters Association chief executive John Walley said financial conditions had become tighter since the Reserve Bank's last statement.
"The dollar now approaches US70 cents and interest rates have continued to rise.
"There is no reason why our OCR should be over twice that of the United States, the United Kingdom and Europe.
"Our central bank seems to compare rates with Australia, but Australia has not even gone into a recession."
Surveys continued to show the export sector was struggling.
The association's survey released on Friday showed a 48% drop in export sales year-on-year, he said.
"We are long past the point of action; talk is ignored unless it is backed up.
"To demonstrate serious intent, the OCR should have been cut a couple of times over the last few months.
"A cut of 50 points is needed now, but any cut would at least substitute ongoing talk with some action," Mr Walley said.
