In Market Focus ANZ says it doubts the Reserve Bank will respond with a  heftier hike in the current environment, for fear of creating a flatter (or even inverse) curve.

"This is what led to such significant fixing in the first place and that's the last thing monetary policy needs.

"Fixed mortgage rates are lower, but the curve is still steep, making fixing expensive still."

It says it is also worth noting that if the Reserve Bank does pause later on down the track, caution will be needed in interpreting why and what a pause means.

"Indeed if increased market stress leads to fewer OCR hikes, rising margins could more than offset any benefit of the lower than otherwise OCR might provide."

BNZ Markets Outlook says local swap rates have continued to ease over the last week or two, to now reflect an OCR path substantially softer than that propounded by the June Monetary Policy Statement (MPS).

"This is why term mortgage rates have just been reduced by the main banks by around 50 basis points.

"This was not in the June MPS forecast."

It says the mortgage book flow is something to keep an eye on should there be a possible wave of fixing interest.

ASB Business Weekly says interest rates fell across the curve last week dragged lower by offshore concerns.

It says in particular, global markets were nervous ahead of the June 30 deadline for European banks to repay large loans to the European Central Bank (ECB). There were concerns that liquidity could become strained as some banks struggled to find alternative finance.

"However concerns alleviated somewhat after the ECB announced it would extend the 12-month loans for another three months."

Westpac Weekly Commentary looks at the Reserve Bank's statement of intent (SOI) which reiterated that unwinding monetary policy is a priority and it is considering the role that macro-prudential policy tools might play.

The Reserve Bank has highlighted two particular measures that it is considering using in a more active way: capital adequacy requirements and prudential liquidity ratios.

Westpac looks in-depth at these macro-prudential policy tools, what they mean and how they fit with the Reserve Bank's existing role. Both measures are already in use in New Zealand at fixed levels that apply throughout the economic cycle.

J P Morgan Weekly Prospects says the drop in the NBNZ business confidence survey last week signals that economic growth will likely moderate in the second half of 2010 in line with its forecasts.

It believes private consumption will likely remain subdues amid rising interest rates and soft wage growth.