The Reserve Bank left the official cash rate (OCR) unchanged today at a record low 2.5%, where it has been for the past year.
But Reserve Bank Governor Alan Bollard gave analysts something to mull over with a change of wording in his indication of when the first rate rise can be expected.
For some time he had been saying the first OCR rise was expected to be "around the middle of 2010".
In today's announcement Dr Bollard said: "As previously indicated, we expect to begin removing policy stimulus over the coming months, provided the economy continues to evolve as projected."
He also indicated he does not expect to have to raise the OCR as far as in previous cycles.
"The increased wedge between the OCR and lending rates, as well as a steeply positive-sloped interest rate curve, is expected to make the OCR increases more effective than in the past," Dr Bollard said.
"Accordingly, these factors should reduce the extent to which the OCR will need to be increased relative to previous cycles."
Dr Bollard appeared relaxed about inflation, saying that in the annual consumer price index, in which had been close to 2% for the past year, it was expected to track within the 1-3% target range over the medium term.
He also expected the New Zealand economy to recover in line with, or slightly faster, than the Reserve Bank's projection in March, when it said gross domestic product was forecast to grow by 3.2% in 2010 and 4.2% in 2011 on an annual average basis.
The economy was recovering broadly as expected and growth was predicted to pick up further through 2010, Dr Bollard said.
"Trading partner activity has recovered more quickly than we expected. Growth in Asia has been particularly strong. Consistent with this, export commodity prices have increased close to their 2008 peak. At the same time, risks to the global outlook remain elevated," he said.
"Notwithstanding the impact of stronger than expected export earnings, New Zealand households remain cautious, with the housing market and household credit growth subdued. Similarly, business spending is weak and firms continue to reduce debt."
The Reserve Bank's decision to leave the OCR at 2.5% today came as no surprise, with all 17 economists polled by Reuters picking the record low rate to remain for an eighth consecutive review.
