The Reserve Bank kept the official cash rate on hold at its all-time low of 2.5 per cent yesterday but was non-committal about the future, beyond saying the outlook remained consistent with its view in the June monetary policy statement, which had implied no rise until the June quarter next year.
Although there is a limited risk the euro area's woes get a lot worse, domestically the bank continues to expect economic activity to grow modestly over the next few years, driven by increasing housing market activity and reconstruction in Canterbury.
"Offsetting this, fiscal consolidation and the exchange rate are constraining demand growth."
The policy conclusion was terse: "It remains appropriate for the OCR to be held at 2.5 per cent."
Westpac economist Michael Gordon said the bank might be reluctant to be seen as committing to any particular line, given the impending change of governor.
"Graeme Wheeler is a relative outsider and we don't know his views on monetary policy," Gordon said. "The Reserve Bank's forecasters may be little better off in this regard. But that doesn't detract from the point that global conditions are uncertain and that keeping interest rates low is the appropriate response right now," he said.
The Reserve Bank said it expected underlying inflation to settle near the mid-point of its target range of 1 to 3 per cent over the medium term.
ASB chief economist Nick Tuffley sees upside risk to that projection, however.
"We see limited spare capacity in the economy, and expect inflation pressures will quickly re-emerge over 2013 and 2014 as the underlying economy recovers and the Canterbury rebuild commences," Tuffley said.
"However, for the time being, the subdued June quarter result [0.3 per cent] highlights the lack of urgency for policy action in the near-term and provides the Reserve Bank plenty of time to observe eurozone developments."
Tuffley expects the OCR will eventually rise further than the Reserve Bank's forecasts imply, to a peak of 4 per cent in mid-2014.
ANZ economist Mark Smith noted the absence of comment on the high New Zealand dollar, beyond the reference it is constraining demand growth.
"This probably reflects the fact that the New Zealand dollar is being driven by events beyond the Reserve Bank's control and there is little it could actually do to move it lower," Smith said.
"We have pencilled in the first OCR hike in mid-2013," he said, but it looked too far off to estimate the timing properly.