"No change" was the dominant message from the Reserve Bank's review of the official cash rate yesterday.
Not only was there no change in the 2.5 per cent OCR itself as universally expected, but also the bottom-line guidance was a verbatim repeat of what governor Graeme Wheeler said six weeks ago: "At this point we expect to keep the OCR unchanged through the end of this year." The outlook remained consistent with that described in the March monetary policy statement, he said.
There were some subtle shifts, though.
The tone of the comments on activity and growth was more upbeat - unsurprisingly after a 1.5 per cent jump in gross domestic product in the December quarter.
He dropped March's comment that there are both upside and downside risks to the outlook. And where in March he talked of an uneven recovery and referred to continued weakness in the labour market, this time he said growth had picked up and referred to an increase, not in consumer confidence, but in consumer spending.
House price inflation has gone from "increasing" to "high". Wheeler repeated last month's warning that the bank did not want to see either financial stability or price stability compromised by housing demand getting too far ahead of supply.
On the other hand two of the economy's stiffest headwinds - the dollar and the drought - which were jammed into a single sentence in March received more ink this time.
Wheeler reiterated the bank's view that the dollar is overvalued. "Further appreciation has occurred partly in response to the announcement of a substantial quantitative easing programme in Japan."
ASB economist Jane Turner said that explanation could be interpreted as partial justification for recent appreciation and perhaps as an acknowledgement that little could be done to lean against the high New Zealand dollar.
"The fact that the statement did not attempt to jawbone the dollar, as has been done on previous occasions, saw the currency jump about half a cent higher against the US dollar," she said.
The drought is expected to negatively affect farm output next season as well and while international dairy prices have spiked higher in response to the drought those gains could prove temporary, Wheeler said.
But BNZ economist Craig Ebert said that while the drought's impact had been, and because of biological lags would be, material, enough rain had fallen since the March statement to avert much greater damage.
Westpac chief economist Dominick Stephens said the Reserve Bank remained caught between two opposing forces.
"[It] can't hike the OCR early for fear of exacerbating the high exchange rate and pushing inflation even further below target in the short run; equally, it can't reduce the OCR or keep it unchanged forever, for fear of stoking the overvalued housing market and creating runaway inflation in the longer term."
The bank expects inflation to remain close to the bottom of its target range of 1-3 per cent this year.
Given the lags with which monetary policy works it is too late for it to influence that anyway.
But it expects it to rise gradually towards the 2 per cent mid-point of its target range.
Stephens said that historically rising house prices had fuelled consumer spending and construction booms had generated inflation pressure, but the process would be slow.
"For now, inflation is below the Reserve Bank's target, and the latest rise in the exchange rate, combined with falling petrol prices, could cause inflation to drop even further in the short run."