Bollard to hold OCR unchanged

Economists can't forecast the wording numerically and they're split on whether Bollard moves in June or July. Economic figures show a tepid economy, with inflation running a tad cooler than market expectations and consumer activity quiet. Officially, he will move ‘mid-year.'

The OCR is expected to push through 5% in the looming tightening cycle, which will squeeze mortgage holders on floating or short-term loans. Consumers have felt poor as unemployment climbed above 7% and the value of their biggest asset, a home with mortgage, stagnated. Against that, gauges of manufacturing and services industry activity have strengthened and inventories have been trimmed, suggesting at least some engines of growth are in place.

"Make no mistake, the days of a 2.5% cash rate are numbered," Brendan O'Donovan, chief economist at Westpac Banking Corp., said in a note yesterday. "Our view is that the first hike will come with the June MPS - accompanied by a set of forecasts to justify the move."

Westpac predicts a more hawkish set of forecasts could drive the kiwi dollar up against its Australian counterpart, as "the perception that New Zealand is Australia's slow cousin is rampant in financial markets."