"Growth appears to be turning out much as expected, inflationary pressures look contained and it feels what it has done so far is the right thing."
That being the case, it was with little surprise that the central bank kept the official cash rate (OCR) at 2.5% and released a monetary policy statement that presented much the same view of the world it had held for the last three months.
There was little for the markets to get their teeth into, with prices in fixed interest and foreign exchange markets barely changing.
"It's not that it's all plain sailing from here on in. Risks to the outlook remain many and varied. But, what is clear is that the Reserve Bank believes the risks around its central scenario are relatively balanced," Mr Toplis said.
Craigs Investment Partners broker Peter McIntyre said it was interesting to see the sharp increase in floating mortgages.
Nearly 29% of all mortgages were now on floating rates, compared with the low of 12.4% in August 2007.
"This must give the Reserve Bank some comfort that it might now have more sway over behaviour. The increase in floating mortgages may be another reason why the bank is more comfortable holding off raising the OCR, knowing that when it does, it will have a more immediate impact than it has in the past," he said.
Mr Toplis said the tightening cycle for the OCR was likely to start in June with the new "neutral cash rate" likely to be 4.5%.
Previously, the central bank had intimated that a neutral cash rate would be about 6%. In the current environment, a rate of about 4.5% would do the same job, he said.
"Consequently, the bank doesn't have to do that much work to get monetary settings back to neutral. This explains why it is relatively relaxed about things and why it has a relatively gentle upward progression in its interest rate track."
While that did not rule out the possibility of large OCR increases, it did reduce the likelihood of such moves, Mr Toplis said.
He believed the near-term inflation data might be higher than the bank would like but agreed with the medium-term view and felt comfortable that the inflationary threat to interest rates was limited.
It was worth noting that the Reserve Bank was forecasting annual inflation to sit at 2.7% by the end of the forecast period.
It appeared the bank felt comfortable with inflation lurking at the top end of its 1%-3% target band, he said.
The fall in food prices last month would have helped the Reserve Bank's expectations for inflation, with the first-quarter results due on April 20.
Food prices fell 1.3% in February, with prices for fruit and vegetables, meat and fish, and groceries all falling from January.
Last month's decline took the annual rise in food prices to just 0.7%, the lowest annual rise in nearly five years, Statistics New Zealand (SNZ) figures showed.
Food prices are 9.6% higher than two years ago.
Prices in the fruit and vegetable subgroup fell 3.5% last month, with apples down 26.6% as the new season's crop became more widely available, and potatoes down 11.4%. Tomatoes were up 12.2% and strawberries up 36.3%.
The meat, poultry and fish subgroup decreased 2.4% in February, with porterhouse/sirloin steak down 17.6% to a level last seen in August 2007. Minced beef did rise, up 5.2%, but chicken prices fell 4.4%, SNZ said.
Grocery food dropped 0.8% from January while non-alcoholic beverages were down 1.9%. Restaurant meals and ready-to-eat food was unchanged.
For the year to February, fruit and vegetable prices were down 1.9%, including potatoes down 20.1% and kiwifruit down 31.1%, while tomato prices rose 31.3%.
Meat, poultry and fish prices edged down 0.2% for the year, with porterhouse/sirloin steak down 11.1% and chicken down 5%, lamb chops up 20.7% and sausages up 13.7%.
