No change is expected today to the Reserve Bank's record
low, 2.5% official cash rate (OCR), as the strength of the New
Zealand dollar remains of most concern for economists.
Economists have been forecasting a rise in March, but ASB
economist Christina Leung said risks were mounting towards a
rate hike later than March, because of the New Zealand
dollar's strength, house price outlook and residential
''The New Zealand dollar outlook is the most significant
[risk], and the murkiest. If it persists, it would point to a
delay'' Ms Leung said.
The Reserve Bank's OCR and monetary policy statement are due
out today. Although there is some economic data confirming
the economic recovery is gaining momentum, some developments,
including house price expectations and building figures,
could prompt the Reserve Bank to hold the OCR longer.
Ms Leung said ''key'' to the kiwi's outlook was the US
Federal Reserve's timing to taper its economic funding
programme. The central bank is stimulating the economy by
''The earlier the taper, the sooner the US dollar itself is
likely to strengthen, and provide some countervailing force
to ... the New Zealand dollar,'' she said.
Westpac chief economist Dominick Stephens said the Reserve
Bank was faced with both stronger economic conditions and a
higher exchange rate than previously anticipated.
He expected today's policy statement would repeat the bank's
previous message that the OCR is going up, but Mr Stephens
predicted that would not happen until about April.
NZIER senior economist Dr Kirdan Lees said its `Shadow Board'
recommends the Reserve Bank leave the interest rate at 2.5%,
but noted support was growing for higher interest rates.
''Higher rates may well be justified, because the economy is
strengthening, fuelled by the Canterbury rebuild, rising
asset prices and consumer confidence,'' Dr Lees said.
Offsetting some inflationary pressures was the rising
exchange rate, he said.