"We believe, on balance, that there has been little to change the Reserve Bank's view of an only modest pickup in economic activity and benign inflationary pressures," WestpacTrust says.

It says the GDP figure will come in below the RBNZ's forecast of 0.8 per cent for the June quarter. Such a figure would reinforce the central bank's medium term view that there is only a modest recovery in the New Zealand economy.

WestpacTrust says in its weekly economic commentary that there are risks the RBNZ may tighten the OCR earlier than expected.

"The Bank has always said that they would prefer any tightening in policy to be earlier and gradual, rather than leaving it too late and having to act more aggressively. In particular, they may be concerned about the weakness in the exchange rate, and they may be more concerned at the strength in some of the housing market data."

The RBNZ said in May it was aiming for an MCI of -100 for the second half of 1999 (made up of a 90-day bill rate of 4.6 per cent and the TWI at 58.7) However, the MCI is current running at around -240, due to a weakening in the New Zealand dollar.

This position raises the question of a tightening of the OCR to compensate for the TWI weakness.

Economists are flagging this as a risk, but suggest the bank is unlikely to act on just a weak TWI number.

Any OCR tightening would be negative for the weak end of the yield curve

Fixed Rates on the climb