Cameron Bagrie, chief economist at ANZ National Bank, says the market had been looking for an extremely hawkish statement. "It was hawkish, but not as much as the market expected," he says. That had prompted a decline in wholesale interest rates and the currency was sold off a little.

Robin Clements, an economist at UBS New Zealand, says the wholesale market had been concerned about the possibility of a rate hike, pricing in about a 50% chance of one at one stage last week.

"The basis was that the Reserve Bank would leave the door open to an OCR rise. They’ve poured cold water on that," Clements says.

"They seem to be pretty confident they’ve done enough and they’ve just got to wait for the inflation blip to pass," he says.

Dean Ford, an economist at Bank of New Zealand, says that although the market had been spooked by data such as that showing inflation at 4%, well outside the Reserve Bank’s zero to 3% target over the medium term, the data hasn’t been all that far from the central bank’s forecasts.

"The one thing they did acknowledge was that short-term inflation pressure has ticked up and they think it’s going to stay high as well for the next few quarters," Ford says. "But they also say it’s largely due to higher oil prices."

The Reserve Bank has held its forecast that inflation will return within its target by the end of 2007. "What they’re saying is that this is just a short-term blip in inflation" so it doesn’t need to react, Ford says.