The Reserve Bank said it had left its official cash rate
(OCR) unchanged at 2.5 per cent but left no clues as to when
the next tightening cycle would begin.
Market expectations are for the bank to start increasing
rates early next year in order to stave off expected
"The bank will increase the OCR as needed in order to keep
future average inflation near the 2 percent target midpoint,"
Reserve Bank Governor Graeme Wheeler said in a statement.
Westpac economists said the statement was slightly hawkish
compared to market expectations but said the main surprise
was that there was signal for a January hike.
However, the 90-day interest rate forecast contained in the
Reserve Bank's monetary policy statement was revised higher,
by eight basis points the March 2014 quarter and by 23 basis
points in the March 2015 quarter.
"This implies the RBNZ expects to start hiking in March
2014," Westpac said.
The New Zealand dollar rallied to US82.87c from US0.82.33c in
response to the news.
Wheeler said in the Reserve Bank's statement that CPI
inflation increased to 1.4 per cent in the September quarter
and inflation pressures were projected to increase.
The extent and timing of such pressures would depend largely
on movements in the exchange rate, changes in commodity
prices, and the degree to which momentum in the housing
market and construction activity spilled over into broader
cost and price pressures, he said.