Economists are united in expecting no change to the Reserve Bank’s Official Cash Rate, currently at 5.75%, when governor Alan Bollard reviews it this Wednesday.

On the one hand, the domestic economy is chugging along quite strongly with the housing and employment markets particularly strong.

National Bank chief economist John McDermott notes annualised economic growth was running at 4.5% in the September quarter. Long-term sustainable growth is generally seen at between 2.5% and 3%. On the other hand, the global economic recovery is still looking shaky, commodity prices important to New Zealand are headed downwards and the New Zealand dollar is surging.

"When you put those strong opposing forces together, you end up where you started: we’re going nowhere,” McDermott says.

Macquarie Bank analyst Roland Randall notes the New Zealand dollar is about 6.25% higher than the central bank was forecasting in November. Under the bank’s abandoned and discredited monetary conditions index, that would have been regarded as the same as a more than 300 basis points rise in interest rates.

The real disagreement is what happens further down the track. Opinions range all the way from ASB Bank and ANZ Bank’s conviction that domestic inflation pressures are likely to build sufficiently to warrant a rate increase to Deutsche Bank’s belief that the negative external pressures will be sufficient to warrant a rate cut. Deutsche Bank senior economist Darren Gibbs says the big question about Wednesday’s review is whether Bollard will signal a rate cut down the track or whether he will take a more neutral stance.

Stephen Toplis, head of market economics at Bank of New Zealand, says the currency’s strength should push the central bank towards an easing bias.

If the wholesale interest rate market can be taken as the “smart money,” it is betting there’s half a chance of a rate cut in June. Trading in the June 90-day bank bills late last week implied an OCR of 5.68% by then.