Why negative rates might not be needed

The $28 billion programme to push down retail interest rates launches next month, meaning cheaper home loans, business loans, and individual interest rates.

The unconventional plan, similar to Australia's lending facility for banks, means the RBNZ is less likely to make aggressive cuts to the official cash rate, according to economists.

FLP is likely to do much of the heavy lifting on interest rates.

As such ASB economists have revised their prediction of negative rates, and predict no changes "for the foreseeable future".

"This reflects our view that the RBNZ’s Funding for Lending Programme (FLP) will be successful, as well as ongoing resilience on the part of the domestic economy," the bank's team said in their latest report.

ANZ chief economist Sharon Zollner expects "a more gradual path" for the OCR now the FLP is set to be rolled out. 

"Whether a negative OCR will be deployed at all is much more of a line-ball call," she said. 

Zollner also pointed to the Reserve Bank's "more recent positive domestic news".

The Reserve Bank's "unconstrained OCR", the projected level of stimulus needed to meet the central bank's objectives, is now higher, with a low of -1.5% instead of -2.4% previously.

Wholesale markets lifted 10-20 basis points last week to predict slightly higher interest rates next year.

Zollner called the market moves "overdone".

"It is entirely possible that a negative OCR will not be needed, but on balance, the outlook is still consistent with a bit more stimulus in time," she added.