Deutsche Bank says the decision to hold the OCR at 2.5% was expected. It says the crucial part of the announcement was the central bank's assertion that it expects "to keep the OCR at or below the current level through until the latter part of 2010".

Deutsche Banfk highlights the Reserve Bank's view on the economy and while there are some "green shoots" economic growth in New Zealand will begin toward the end of this year but "the recovery is likely to be slow and fragile."

With regards to future interest moves Deutshce Bank says the RBNZ forecasts imply that the projected low in the OCR is 2.5%, with the first lift in the OCR coming at the end of 2010.

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ASB Bank
It too said the statement was broadly what it was expecting. It highlights that the RBNZ "explicitly mentioned" scope for further cuts and continues to expect to hold the OCR at current levels until the latter part of 2010.

"While verbally the RBNZ maintained its easing bias, their 90 day forecast does not actually incorporate another cut. The RBNZ may think it has done enough for now and the threshold for further cuts is now higher."

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BNZ
Today's Monetary Policy Statement (MPS), while difficult to poke holes in, was quite some shift from the dovish undertones of the late-April OCR review, and the risk-riddled Financial Stability Report (FSR) of four weeks ago. Its unchanged cash rate, of 2.50%, was no genuine affront to our rate cut view.

This decision was always touch and go. The big deal is that the Reserve Bank has taken a big step toward the middle ground, as it begins to put more weight on the recovery, rather than risks. The question is; is it too bold a step, too soon?

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Westpac
Westpac says that the RBNZ's interest rate projections were markedly different from the March MPS.

"The 90-day rate is expected to remain around the current level of 2.8% until late 2010 - which they have said as much in the last two OCR reviews - and indicates that their central view is for no further cuts this year. But the more notable change was that the following tightening cycle is expected to be extremely slow, with 90-day rates only reaching 4% by early 2012.

"This is clearly a message aimed at financial markets, in order to keep a lid on short-term wholesale rates - the RBNZ is looking to borrowers to fix for terms of a year or less, where rates are significantly lower than for longer terms."

Westpac also points notes that RBNZ's comments that although rising longer-term interest rates overseas are placing upward pressure on longer-term lending rates here, there is room for further reductions in shorter-term lending rates.

This is a statement designed to nudge banks to pass on more of the recent OCR cuts, and as a reminder to borrowers that short-term fixed rates are much cheaper at the moment and will remain so for some time.

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