Reserve Bank Governor Alan Bollard may use his swansong interest rate review this week to keep conditions unchanged, because modest growth in the New Zealand economy is being offset by a tepid global outlook.
Dr Bollard will keep the official cash rate at 2.5 per cent, according to a Reuters survey of 18 economists. He won't move until June next year at the earliest, based on the median of expectations. The rate hasn't budged since March last year from its lowest point since it was introduced in March 1999.
The monetary policy statement is Dr Bollard's last before handing over the job to former World Bank executive Graeme Wheeler. That means economists may not try so hard to read the nuances of the statement, given that Mr Wheeler is likely to develop his own style and 'language'.
"For all we know ... Wheeler may have a markedly different view on where monetary policy should be heading," said Dominick Stephens, chief economist at Westpac.
"The soon-to-be-signed Policy Targets Agreement could provide some early clues on this matter, but more likely, it will take a few months in the hot seat before any differences become apparent."
The statement on Thursday comes seven days before economic growth figures for the second quarter, which may show gross domestic product slowed from the first quarter's 1.1 per cent pace. Economists at UBS New Zealand are forecasting a 0.5 per cent expansion in the latest quarter.
"We expect the message to be that the domestic economy is on track to 'grow modestly' but that a 'poor' external outlook means that it remains appropriate for the OCR to be held at 2.5 per cent," said Robin Clements, economist at UBS.
Annual inflation is sitting at the bottom of the central bank's 1 per cent-to-3 per cent target range and some economists say it may have slowed further in the third quarter. At the same time, the New Zealand dollar has remained stubbornly high.
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