The Reserve Bank of New Zealand (RBNZ) today kept policy rates on hold at 3.0%, as expected. The aftermath of the earthquake will inevitably cause some disruption in coming months but the RBNZ even before this event was minded to pause given recent lacklustre household spending data and the weaker outlook for business investment. The pause is likely to last until at least Q1 2011. Once the hikes recommence, the tightening cycle will almost certainly be stop-start and prolonged, although we still think that the cash rate in the end will rise more quickly than the RBNZ currently anticipates.