It will be no surprise at all if the Reserve Bank raises the official cash rate again on Thursday to 3.25 per cent - rather the focus will be on what it signals about the timing and extent of interest rate rises beyond that.
While the message from the June monetary policy statement is expected to be that the outlook for economic growth and inflation pressures is still one which requires the normalisation of interest rates over time, the financial markets have priced in more landings and fewer steps in the staircase of rate rises ahead than the bank projected three months ago.
Westpac chief economist Dominick Stephens said wholesale interest rates had fallen to the point where swap market pricing indicated an expectation that the OCR will be 4 per cent by the end of next year.
"By contrast the Reserve Bank's forecasts back in March implied an OCR of 4.5 per cent at that point," he said. "This drop in market interest rates will be worrying for the Reserve Bank because it is prompting banks to reduce fixed mortgage rates. The average two-year fixed mortgage rate advertised by the four main banks has fallen 34 basis points in two months.
"Lower mortgage rates could reignite the housing market."
Deutsche Bank chief economist Darren Gibbs said the Reserve Bank's forecasts in March were consistent with either four or five increases in the official cash rate this year. Thursday's will make three.
The flow of economic data since then meant the urgency of normalising interest rates had fallen very slightly and at the margin was more consistent with four than five rate hikes this year, Gibbs said.
A Reuters survey of 17 banks and other economic forecasters found the average expected level of the OCR by the end of the year to be 3.66 per cent, implying one more increase beyond Thursday's, and a two-thirds chance of another. But money market pricing is more dovish.
Property Report: Origins of a heated property market
Property Report: Is this the beginning of a crash?
Property Report: LVR: Here to stay?
Property Report: Why housing is the new election battleground
What your home is worth - the latest property values from QV.co.nz
Stephens expects the net effect of the new information since March to be that the Reserve Bank will pencil in a forward track for 90-day interest rates that may be a shade lower than it published then - but only a shade.
"The challenge for the bank will be to deliver this modest change to the outlook while still prodding errant financial markets into lifting two and three-year swap rates," Stephens said.
"The right balance could be achieved by signalling that, from here, the OCR hiking programme will proceed at a pace of 25 basis points per quarter."
A key judgment facing the Reserve Bank is what to make of the unexpected strength of the net migration gain of late, largely the result of fewer New Zealanders leaving for Australia and more returning.
It boosts demand for goods, services and, crucially, housing but has also relieved pressure in the labour market, resulting in a higher unemployment rate and less wage inflation than the bank had forecast.
ASB chief economist Nick Tuffley believes the central bank will be very comfortable with developments in the housing market - slowing turnover and easing house price inflation - even with stronger-than-expected migration flows.
Meanwhile, one of the factors propelling the current economic upswing - the most favourable terms of trade for more than 40 years - is thought to have peaked. Export dairy prices have fallen 26 per cent from their peak in February. Despite that, the exchange rate on a trade-weighted basis has been running about 2 per cent higher than the Reserve Bank assumed in its March forecasts which, all else being equal, means less disinflationary work for interest rates to do.
Weighing in on the marginally inflationary side of the scales is last month's Budget, which signalled a less contractionary fiscal policy than previously forecast - albeit more in the out years than in the year ahead.
Gibbs said that compared with the forecasts the bank would have relied on in March, core Government spending was now forecast to be 0.7 per cent higher in 2015/16 and 1.1 per cent higher in2016/17.
"Treasury modelling - discussed with the Reserve Bank - suggests this spending could accumulate over time to require the OCR to be 15 to 30 basis points higher than would otherwise be the case."