If the Reserve Bank leaves the official cash rate on hold at 3.5 per cent today it will be the right call, the NZIER's shadow monetary policy board believes.
The board is made up of nine economists and business leaders each of whom apportions 100 points across possible OCR levels to indicate what they believe is the right setting for the economy.
There is 62 per cent support for leaving the rate on hold but as a second best preference there is now more support for a lower rate than a higher one.
"The appetite for interest rate hikes is waning," said Kirdan Lees, a principal economist at NZIER, who set up the shadow board. "Annual inflation is running at 1 per cent so future rate hikes risk driving inflation below the Reserve Bank's target range." Interest rates were low by historical standards but firms were struggling to pass on price increases to consumers, he said.
Arthur Grimes, a former chairman of the Reserve Bank board, said it needed to be ready to move interest rates down as well as up, especially if the Ebola outbreak were to spread.
