While international central banks cut their cash rates in an attempt to boost struggling financial markets the Reserve Bank of New Zealand (RBNZ) looks likely to wait until October 23 to make an announcement.
The US Federal Reserve, the European Central Bank, Bank of England and central banks in Sweden and Switzerland all joined the new interest rate offensive, cutting rates by half a percentage point. China joined in cutting 27 basis points off its key rate.
But while the move brought temporary respite, London's main share market index soon fell back again and US stocks endured another rollercoaster ride before the Dow Jones industrial average closed 2 percent lower, while Tokyo saw its biggest one-day fall in two decades.
New Zealand economists are predicting a historic Official Cash Rate (OCR) cut -- with some forecasting a cut of 100 basis points to 6.5 percent.
The speculation follows a decision by the Reserve Bank of Australia (RBA) to cut the Australian cash rate by 100 points to 6 percent.
The RBA move was bigger than the 50 point fall economists had predicted. It was the first 100 point cut to the cash rate since May 6, 1992, when the RBA lowered the cash rate to 6.5 percent.
The New Zealand OCR was cut by 50 points following the September 11, 2001 terrorist attacks and has been raised by that amount, but never by any more.
Westpac markets economist Michael Gordon said there was a 50 percent probability of a 100 point cut.
He said the RBNZ did not have to coordinate with the RBA, but the RBA had "cited the same concerns as those of the RBNZ" and both were looking for relief for homeowners and business.
"We can't rule out an earlier move (than October 23) but the fact that it didn't happen this morning reduces the probability." RBNZ Governor Alan Bollard has had enough time since the RBA and international announcements to make a decision, Mr Gordon said.
He said it was possible that a local announcement would be made tomorrow, but the fact that the international cuts "didn't work" to boost market confidence made it unlikely.
ANZ senior market economist Khoon Goh also predicted the New Zealand rate would also be cut by 100 points.
ASB and BNZ both predicted a 75 point drop to 6.75 percent.
ASB chief economist Nick Tuffley said the bank expected a 75 point cut in October to be followed by a further 50 point cut in December and 25 point cut in January to take the OCR to 6 percent.
BNZ currency strategist Danica Hampton predicted a 75 point cut but said a 100 point cut should not be ruled out.
David Tripe, director of Massey University's Centre for Banking Studies, said there were "mutterings" the RBNZ may make its OCR announcement earlier than October 23 and said a significant fall in the 90-day bill rate yesterday was a market indication that the cut would be bigger than previously expected by the market or the RBNZ.
He said global central banks had lowered the rate at which banks raise funds from the central bank but concern about the "credit worthiness" of banks meant the margin between the interbank rate and the central bank rate was growing.
"In a normal liquid market when deciding on the interbank rate one would look at the central bank rate and calculate the added risk of the normal bank, usually between 10-30 basis points.
"Now people are saying `we have some real concerns about the credit worthiness of the normal bank' and the interbank rate is rising correspondingly."
When the RBA cut its rate by 100 points earlier this week banks reduced their mortgage lending rates by 80 points, not the full amount of the cut.
This was part of the reason the cash rate cuts were so large, Mr Tripe said.
