Floating mortgage rates won't be rising any time soon

Bollard left his official cash rate (OCR) unchanged at 2.5%, its lowest level ever. His comments about the high New Zealand dollar being unwelcome saw the currency drop about 0.7 US cents while his comments that inflation will settle comfortably within his zero to 3% band saw wholesale interest rates ease about five basis points.

Bollard's statement "wasn't shy in being dovish," says Craig Ebert at Bank of New Zealand. "They were hardly going to come out and say, we were wrong" and the economy wasn't as bad as expected last month when Bollard cut the OCR from 3% in response to the Christchurch earthquakes.

Nevertheless, Ebert says inflation is unlikely to prove as benign as Bollard currently expects. "They're taking a very cautionary approach and there will be pressure in due course to remove some of this extreme accommodation," he says.

"In six months time there will be evidence that the earthquake hasn't cause a national recession, supply issues will be back on the table and inflation isn't going to fall away.”