This week's monetary policy statement on Thursday is "crunch time" for the Reserve Bank's attempts to influence monetary conditions - but banking analysts disagree on what will happen.

ASB Bank chief economist Nick Tuffley it expected the Reserve Bank (RBNZ) to cut the official cash rate (OCR) by 25 basis points on Thursday.

"In July, the RBNZ stated that continued tightness in monetary conditions could lead to a re-assessment of its policy," he said.

Since July, conditions had tightened further, with both the NZ dollar and longer-term interest rates drifting higher.

"If the RBNZ is still concerned about tight monetary conditions it now has to decide whether it will follow through on its implied threat and cut, or whether it resigns itself to the role of spectator," Tuffley said.

Another cut in the OCR would "anchor expectations" and offset the impact of the strengthening NZ dollar exchange rate.

But Tuffley said the wider market expected that "green shoots" optimism would keep the central banker holding the cash rate at 2.5 per cent.

He warned the RBNZ's assumption that the NZ dollar exchange rate would drop and sustain a low level "is increasingly shaky and needs to be re-assessed".

Tuffley acknowledged his prediction was in a "distinct minority" but said that at the very least the central bank would reinforce that OCR increases are a lot further off than the market was allowing for in its pricing of interest rates.

"Without action to accompany this stance, continued jawboning will fall on deaf ears," he said.

"The RBNZ needs to be wary that doing nothing will risk killing off the recovery when it remains fragile".

Manufacturers and Exporters' Association (NZMEA) chief executive John Walley said that the RBNZ governor, Alan Bollard said in July he would re-assess policy settings in September if financial conditions remained tight.

"Conditions have worsened since then, so Bollard must follow through on his promise," said Walley.

"To demonstrate serious intent the OCR should have been cut a couple of times over the last few months, a cut of 50 points is needed now, but any cut would at least substitute ongoing talk with some action".

BNZ analyst Danica Hampton said she suspected the RBNZ would remain content to leave raising rates until the middle of next year.

"We think there's been enough good news over the past six weeks to keep the RBNZ from cutting the OCR this week," she said.

"Our official view has the first OCR hike coming in June with a further 100 basis points of tightening over the remainder of calendar 2010.

Westpac chief economist Brendan O'Dononvan said the RBNZ was still concerned about the strength of the NZ dollar, which played a major role in its inflation forecasts - "perhaps more than the market appreciates".

" The RBNZ will continue to signal no rate hikes before the latter part of 2010," he said.

"We think there has been enough evidence about the pace of the global recovery - and more importantly, New Zealand's place in that recovery - to assuage many of the RBNZ's concerns."

But he said it was a tough call as to whether the RBNZ's easing bias - "the OCR could still move modestly lower over the coming quarters" - would be retained on Thursday.

The recovery was progressing quite nicely even with the stronger currency, and the fear that New Zealand was missing out on the global upturn no longer seemed valid.