But that stronger data does increase the possibility of a further rate hike later this year and decreases the likelihood of any rate cut.
A Reuters poll of 14 economists found they think there’s a 73% chance of Bollard leaving rates unchanged, although there’s a 25% chance of a 25 basis point rise from the current 6.5% OCR.
They rated the chances of a rate cut at only 1%. Among the data, the December quarter inflation rate was 20 basis points higher than the central bank had expected and pushed the annual rate to 2.7%, just below the bank’s 3% upper limit.
A business survey showed a high level of capacity utilisation, the New Zealand dollar is weaker than the Reserve Bank expected and retail sales in November were 7.7% up on the previous November.
Westapc chief economist Brendan O’Donovan says he expects no change "but they will still be talking tough."
While the latest economic growth figures were weaker than the central bank had expected, "most of the other stuff will be keeping them nervous nellies."
Stephen Toplis, an economist at Bank of New Zealand, says if he was setting monetary policy, he would be increasing rates.
However, he doesn’t think Bollard will this week because he "was so dogmatic at the last monetary policy statement that he wasn’t going to shift rates."
Toplis rates the probability of a rate increase in the first half of this year at 45%.
ASB Bank economist Kate Skinner is also expecting tough rhetoric and says there’s a risk Bollard may prepare the market for a rate hike in March.
"On the whole, the data point to more tightening being needed," she says.
ANZ Bank’s economists says the recent data "will have the Reserve Bank on edge" but that the hurdle that would push it to raise rates now hasn’t been met.
The six rate hikes last year have to be given a chance to work, they say.
"If the Reserve Bank does pull the trigger, what is the plan from here? Where does the currency go? Markets will automatically shift to price in a chance of a further hike in March. Further pushes higher for the OCR will increase the probability of policy reversal and potentially unnecessary volatility in rates."
