Prospects of June rate rise increase

The speech was interpreted by financial markets as being a little hawkish, and pricing shortly after the speech suggested a 72% chance of a rate hike at the next official cash rate (OCR) announcement in June, compared to 68% previously.

JP Morgan economists say the key part of yesterday's comments were the "truck driver" analogy:

"Using a truck driver analogy, our foot is strongly on the accelerator. Over coming months we expect to reduce the pressure on this pedal, but in effect to keep some throttle going. Truck drivers know they must reduce acceleration long before the corner. We are not talking about tightening policy yet. We do not expect to have to touch the brake pedal for the some time."

"This implies that the RBNZ is readying to remove the policy stimulus, but exactly when the truck driver will decide to ‘reduce acceleration' will depend on how the economic data evolves," JP Morgan says.