The NZIER shadow board believes the Reserve Bank should leave the official cash rate on hold at 2.5 per cent when it reviews it tomorrow, but less emphatically than it did six weeks ago and with an increasing preference for a rise as the next best option.
The shadow board is a panel of nine economists and businesspeople the New Zealand Institute of Economic Research asks to quantify their preference for various levels the bank could set its policy interest rate at. The results are then aggregated to give an indicator of which rate the bank should go for and the shifting balance of risks around it.
It now has a 61 per cent preference for keeping the OCR on hold, as the markets are confident the bank will, but that is down from 69 per cent ahead of the June review.
And it has a 26 per cent preference for a rate increase, up from 19 per cent last month and 12 per cent in April.
Inflation has been below the bottom of the bank's 1 to 3 per cent target band for a year.