It might have surprised markets in a technical sense but the Reserve Bank's decision to leave the official cash rate on hold was far from shocking.

Governor Adrian Orr has opted to play it cool. A summer breather makes plenty of sense.

The economy isn't a falling off a cliff and while the rate of economic growth is still slowing, it's happening at a predictable pace.

This one was always a line-ball call.


Economists were split almost 50/50 until a grim-looking survey of inflation expectations yesterday shifted a few back towards picking a cut.

Predictably the dollar and short-term interest rates spiked on the news - markets always react in binary terms.

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But as Orr pointed out that there was enough economic data to logically justify either a cut or pause.

So it was very much a decision open to interpretation and balanced around the strategic thinking of the monetary policy committee.

Their thinking was that monetary policy conditions remain stimulatory so we have room to wait and see what happens over the summer.

In other words it believes the Bank believes the double cut it made in August (to take the OCR to 1 per cent) is still working its way through the system.

Mortgage rates have fallen sharply this year with most of those cuts having been passed on by the banks.


But it takes time for the bulk of home owners to benefit as they reset mortgage terms which are typically fixed for between six months and three years.

Looking at the Bank's broader focus on financial stability (ie debt and precarious house prices) this decision also works to head off risks that real estate market is getting carried away on a low interest-rate buying binge.

Even with the pause rates will be low for a long time and renewed strength in the housing market is a powerful stimulus in its own right.

Big economic risks remain. Business confidence is still very low, and the global economy is still slowing.

But there have been positives in the past few months to keep things finely poised.

Export returns have been strong, the labour market and consumer sentiment have held firm.

"It's not as bleak a place as it was back in August," Reserve Bank chief economist Yuong Ha said at today's press conference.


The Reserve Bank has revised down its GDP growth outlook to 2.1 per cent next year (from 2.7 per cent) - more closely in line with market economists.

Some believe those forecasts are still too rosy.

"We expect growth will turn out to be weaker than the RBNZ's new [weaker] forecasts," ASB chief economist Nick Tuffley said.

"We still expect a further 50bp of OCR cuts to a low of 0.5 per cent, but now in February and May."

Those views won't faze Orr, who points out that the double cut in August put them ahead of the curve.

Further cuts remain on the table.


"We will continue to monitor economic developments and remain prepared to act as required," he said.