An increasingly dark international outlook is expected to keep the Reserve Bank in wait-and-see mode and the official cash rate on hold at 2.5 per cent when it releases its December statement on Thursday, on the eve of yet another crisis summit in Europe.
The financial markets, as reflected in Credit Suisse's swaps-based indicator, are pricing in no increase in the official cash rate over the next year.
As recently as 10 days ago they had priced in a 25 basis point rate cut over the year ahead, a stark turnaround from the prospect of one or maybe two rate rises which was their view when the central bank last reviewed rates on October 27.
ANZ and ASB see rates on hold for another year, Westpac is now picking September at the earliest and while the BNZ is still formally calling June, its senior economist Craig Ebert says the risks had clearly shifted towards delay.
Consensus forecasts of economic growth among New Zealand's trading partners continue to be revised downward, driven by the flow-on effects of a near-inevitable recession in Europe.
Export commodity prices, while still high by historical standards, have been falling for six months and at an accelerating rate. Last week's terms of trade data suggest that that source of impetus for the economy has run its course for the time being.
But the main channel through which Europe's travails are expected to affect New Zealand is through higher costs for the 25 per cent of banks' funding they derive from overseas wholesale markets. Last week the major central banks moved in concert to boost liquidity in those markets. So if the Reserve Bank projects a lower track for its official cash rate, that can be seen as offsetting expectations of a higher risk premium on top of what banks will have to pay for funding.
"The Reserve Bank in recent years has put more of an emphasis on getting the right level of retail rates, whereas a few years ago it simply wasn't an issue because the funding premiums were very low and very stable," Westpac economist Michael Gordon said.
"Now there is much more focus on what is the level of rates the final customer is facing."
Compared with three or four years ago the banks' holding of liquid assets is higher, and they derive a higher proportion of their funding from retail deposits and long-term wholesale sources. In addition, growth in credit has been very weak - less than 1 per cent over the year to October.
In its financial stability report last month the Reserve Bank said that New Zealand banks have had little difficulty in raising short-term funding recently, with little movement in short-term funding costs.
"The availability of unsecured funding for longer terms is harder to gauge, as issuance is fairly sporadic, and there has been a low volume of foreign debt issuance by New Zealand banks so far this year. Funding needs have been low, with domestic credit demand generally weaker than expected and domestic retail funding having been unexpectedly strong.
"However, it would have been very difficult to place new longer-term unsecured debt issues over the past two or three months as the sovereign debt crisis has played out," it said.
Economists see little in the recent data likely to change the bank's underlying view that its next move in interest rates will be to raise them but that there is no urgency to do so.
"At the margin there has been a little bit less strength in some of the activity indicators," Ebert said.
"Even more important, the inflation indicators we have seen over the past three months have been less threatening.
"Expectations are still something to keep an eye on, but the more immediate price trends, including wages, haven't really picked up. That gives the Reserve Bank some time."
ASB economist Christina Leung said housing market data indicated some slowing in the recovery in house sales.
"Meanwhile, credit growth remains weak, reflecting continued caution amongst households and businesses. We expect the recovery in household spending and business investment over the coming years will be gradual."