"The overall message will be [interest rate] hikes are coming but not this year," Westpac chief economist Dominick Stephens said.
For most of this year monetary policy had been stuck between a rock and a hard place.
"The high and rising exchange rate had pushed inflation below the bank's 1 to 3 per cent target range, but the Canterbury rebuild and rapid house price inflation threatened to generate inflation over the medium term," he said.
The kiwi has fallen 4 per cent, on a monthly average trade-weighted basis, since its peak last April, reversing the disinflationary impact of a rising exchange rate which has largely offset domestic (non-tradeables) inflation running at 2.5 per cent.
Reserve Bank governor Graeme Wheeler in a speech on August 20 reiterated his reluctance to raise the official cash rate, from the historic low of 2.5 per cent, while monetary policy across most of the developed world is still extraordinarily loose.
"With policy rates remaining very low in the major economies, and falling in Australia, any OCR increases in the near term would risk causing the New Zealand dollar to appreciate sharply, putting further pressure on New Zealand's export and import-competing industries," Wheeler said.
Joining a lower-than-expected exchange rate in the hawkish side of the scales are strong business and consumer sentiment, underpinned by buoyant housing markets and construction in the two largest cities, a pick-up in net immigration and an increase in the forecast dairy payout which, so long as it eventuates, will boost dairy farmers' incomes by around $3 billion (or 1.5 per cent of gross domestic product) compared with last season.
The rise in global interest rates has seen fixed mortgage rates in New Zealand rise too, by about half a percentage point for five-year rates.
That would encourage borrowers to remain floating, ensuring monetary policy remained potent when the time came for tightening, Deutsche Bank chief economist Darren Gibbs said.
House price inflation had shown some signs of slowing in recent months, he said, with the seasonally adjusted annualised change slowing to 5 per cent in the three months to July, from 12 per cent in the three months to April.
What effect the "speed limit" restrictions on high loan-to-value (LVR) mortgage lending will have is unknown.
The Reserve Bank has said its modelling suggests house price inflation could be 1 to 4 percentage points lower over the first year than it would otherwise be, and the increase in households' mortgage debt 1 to 3 percentage points lower.
Stephens said the impact of LVR restrictions on the housing market was highly uncertain but with inflation currently below target and forecast to rise slowly, the Reserve Bank had time on its side and could let monetary policy take a back seat while LVR restrictions worked through the system.
Gibbs said the bank was likely to bring forward the projected start of its OCR increases closer to the March 2014 timeframe most economists are picking.
"We expect the pace of the projected tightening to remain gentle by historical standards. That is, no more than our forecast of 75 basis points of tightening by end of 2014."
Thursday's OCR decision
* Currently 2.5 per cent.
* Unchanged since March 2011.
* Widely expected to rise from March next year.
