With export commodity prices falling, fiscal policy contractionary, and the rebuild of Canterbury yet to gather pace, monetary policy carries the burden of supporting the economy through what is still a tepid recovery.
As universally expected governor Alan Bollard left the official cash rate at its all-time low of 2.5 per cent this morning and the accompanying statement makes clear the bank has not changed its view of the world since its June forecasts were released.
While there is a "limited" risk the euro area's woes get a lot worse, domestically "the bank continues to expect economic activity to grow modestly over the next few years. Housing market activity continues to increase as forecast, and repairs and reconstruction in Canterbury are expected to further boost the construction sector. Offsetting this, fiscal consolidation and the exchange rate are constraining demand growth."
The policy conclusion is non-committal: "It remains appropriate for the OCR to be held at 2.5 per cent."
The bank's dilemma is that is caught between overvalued housing and an overvalued dollar.