Data showing tentative signs of recovery is not expected to stop the Reserve Bank from cutting the Official Cash Rate again this week - by as much as half a percentage point.
The majority of economists expect Governor Allan Bollard will cut the Official Cash Rate by 50 basis points on Thursday to 2.5%, while market pricing is split between 50 and 25.
However, some say improvement in some economic indicators suggest Dr Bollard has cut far enough.
The rate was lowered to 3% on 12 March. In a Monetary Policy Statement at the time, the Reserve Bank indicated that it was almost finished cutting rates and further cuts would be small.
What followed was a spike in the dollar, while long-term interest rates shot up as borrowers flocked to the banks to lock-in low fixed-term mortgage rates.
That prompted the Reserve Bank to issue a rare inter-meeting statement, saying the rise in longer term rates was unwarranted.
BNZ markets economist, Mark Walton, says Dr Bollard is likely to tread carefully to avoid a repeat of that scenario.
Deutsche Bank chief economist Darren Gibbs has been an advocate of hefty rate cuts in the past, but now says the bank should not cut any further.
He believes the cuts to date and fiscal expansion is starting to work and further significant easing could prove to be counterproductive.
Mr Gibbs says given there is some slightly better data offshore in the global equity markets and in the credit markets, there is a good case for pausing.
While he says the bank's unlikely to pause, he does not believe there's a case for a cut of 50 basis points.
But others point out that any improvement in data on the economy show at best only glimmers of normality and it's far too early to call a recovery, much less start worrying about rates being too low.
More bad news seen ahead
While the housing market looks to be improving, indicators like the Institute of Economic Research's business opinion survey remain steadfastly grim.
TD Securities senior strategist Annette Beacher believes there's still a lot of bad news in the pipeline, particularly in the labour market, which could soon quash any emerging optimism.
She expects the unemployment rate to soar and expects the Reserve Bank will cut by 50-basis points. She says small cuts, or no move at all, simply will not do.
Ms Beacher says decisive action is required to get currency down and market interest rates are firmer than what would be required in this environment.
The Reserve Bank announces its decision on Thursday.
