ANZ, Westpac, ASB, Deutsche Bank and the markets are all expecting the Official Cash Rate (OCR) to be cut by the Reserve Bank at next Thursday's Monetary Policy Statement. BNZ and J P Morgan however expect the OCR to hold until 2012.

In Property Focus, ANZ says it expects the Reserve Bank to cut the OCR by 25 basis points in both March and April with floating rates falling back to last year's levels.

"The sheer scale of the event and pending impact on confidence warrants an immediate response," says ANZ.

It believes the Reserve Bank has every justification it needs to cut the OCR and it should do so at the March 10, Monetary Policy Statement.

Reflecting on the timing of previous emergency cuts, ANZ says following 9/11 it took eight days for the Reserve Bank to cut rates and after the Lehman Brothers collapse, a month.

It also says fixed rates are set to fall dramatically, particularly for shorter terms such as two and three years.

"Indeed wholesale interest rates have plunged (the wholesale two year rate has fallen 40 basis points since the quake), and continue to fall, which will be reflected in fixed mortgage rates as soon as market rates stabilise."

ASB Economic Weekly points out that the earthquake has come at a time when the economy is clearly vulnerable and domestic demand is weak.

ASB is convinced that the potential economic consequences warrant a large cut of 50 basis points at next Thursday's meeting, as does Westpac.

In Weekly Commentary, Westpac puts itself in the Reserve Bank Governor's shoes.

"Our judgement is that the Governor will err on the side of shoring up confidence and easing the burden on an economy whose short-term growth prospects have been stunted.

"To be effective, the cut would need to be timely and meaningful in size," it says.

J P Morgan Weekly Prospects believes the Reserve Bank will be sidelined until 2012 with a cut not warranted.

It believes the policy rate is already highly stimulative with GDP to be above trend in the second half of the year as the rebuilding effort kicks in.

"Also, additional policy stimulus would do little to boost tourism and agricultural industries upon which Christchurch relies," it says.

BNZ Markets Outlook agrees saying the OCR is probably the wrong tool for the job, with cuts not only having little immediate impact on the Christchurch economy, but also having the potential to create distortions  and imbalances in the wider economy.

"Why use such a blunt nationally-set tool, creating indiscriminate winners and losers, when more direct, fiscal driven responses are by far the most appropriate and effective?"

BNZ Weekly Overview economist Tony Alexander says while the Christchurch earthquake will clearly disturb economic activity, there is some offset  to this from the upgrade to Fonterra's forecast payout this season.

"We see practically no chance that the Reserve Bank will tighten policy this year and we have the next rate rise penciled in for January 2012."