The Reserve Bank will not be dictated to by what other central banks do, but ructions in global markets would still hold some weight for the Reserve Bank ahead of next week's Official Cash Rate review, economists say.
Opinion is divided on whether inflationary pressures and the global crisis will be enough for Alan Bollard to begin lifting rates next week.
The Official Cash Rate is sitting at a record low 2.5 per cent, where it has been since April 30 last year. Many believe next week the Reserve Bank will begin hiking rates again.
The last time the Reserve Bank increased rates was July 2007.
Berl chief economist Dr Ganesh Nana said there was no convincing evidence to support the need for a rate rise next week.
"A month ago it was looking like a done deal. Now I would say it's going to be a 50/50 call," he said.
"I definitely don't see overwhelming evidence that there are inflationary pressures out there that need to be hauled in."
The turmoil offshore could be enough for Bollard to hold rates at their current level, he said.
In a statement earlier this year Bollard said he expected to begin removing stimulus "around the middle of 2010".
ANZ chief economist Cameron Bagrie predicts there will be a "cautious procession" of rate rises beginning with 25 basis points next week.
The Reserve Bank would not be influenced by other central banks did, but would need to be looking at where the "balance of risk resides", he said.
Canada became one of the first countries in the G7 group (the seven largest industrialised nations) to lift their rates this week, since the recession.
Meanwhile Australia's central bank left its interest rate unchanged at 4.5 per cent.
Bagrie says there is a 60:40 chance the Reserve Bank will lift rates next week.
"Inflation pressures are starting to pick up, unemployment is down, and commodity prices are up."
"We known housing and retailing is still struggling, but you do have the OCR at an exceptionally low level at the moment so we need to start moving." he said.
Bagrie said he doubted the global situation would be enough for the bank to hold rates.
"I think the path of least regret is to hike but deliver a pretty cautious statement," he said.
ASB said it also expected the Reserve Bank to increase the Official Cash Rate by 25 basis points on June 10.
"Given the effects of the sovereign debt crisis on NZ have been limited to date, we expect the RBNZ will begin removing monetary policy stimulus."
The New Zealand Manufacturers and Exporters Association today urged the Reserve Bank to hold rates because a rise could threaten future export recovery.
"If the OCR is raised prematurely we are likely to end up in the same destructive cycle we experienced prior to the economic crisis of an overvalued exchange rate stifling our traded sector and fuelling unsustainable growth in the domestic sector," association chief executive John Walley said
Central Banks in Europe and North America had shown no inclination to move up their official interest rates and the Reserve Bank should take its cue from them, he said.
See recent OCR changes here.
