RBNZ Flags Future Interest Rate Rises Despite Current Pause

New Zealand’s central bank said additional rate increases will eventually be needed even as it extended its tightening pause amid softer inflation. The currency surged.

“Some further increase in the official cash rate is expected to be required at a later stage,” Governor Graeme Wheeler said in Wellington after keeping the official cash rate at 3.5 percent. The Reserve Bank of New Zealand lowered its forecast for the 90-day bank bill rate, suggesting borrowing costs won’t rise again until the second half of 2015.

Wheeler is extending the rate pause he began in September after third-quarter inflation fell to the bottom of his 1 percent-to-3 percent target range and as dairy and oil prices slump. He said gradual increases in rates will still be needed as the economy expands at around 3 percent a year and the country’s jobless rate falls.

Bloomberg

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