The New Zealand dollar fell as low as 61.82 US cents last week, more than 4.5% down on its high this year. While domestic or "non-tradeables" inflation has been running hot, up 1.2% in the March quarter and up 5% in the year ended March (house prices rose 20.3% in the year), overall inflation has been kept in check by weak import and export or "tradeables" prices.

On the other hand, ASB Bank economist Kate Skinner says the scales have tipped in favour of no change in interest rates, largely because the overall inflation rate, 0.4% in the March quarter, was below market expectations of 0.5% and the Reserve Bank’s own forecast of 0.6%.

"These data buy the Reserve Bank some time with which to reconsider the divergent pressures present in the economy during the more thorough process associated with the June monetary policy statement," Skinner says. But she too thinks the decision will be close.

Macquarie Bank takes the same view, expecting that current inflation pressures will be temporary.

Westpac Bank acknowledges the fall in the currency, but says this could reverse if the US Federal Reserve doesn’t raise interest rates or if US data disappoints. "We believe the Reserve Bank should invest in some deep breathing exercises and keep the OCR on hold," it says.

A recent poll showed five of 13 economists were expecting a rate hike.