Article by ForexTime

The Reserve Bank of New Zealand left its benchmark interest rate unchanged at 3.5%. This was widely expected but the hawkish tone of the central bank’s Governor was what pushed the kiwi higher.

Reserve Bank governor Graeme Wheeler said he’s likely to continue raising interest rates even in the face of a softer economic outlook, surprising economists who had expected a more dovish statement and driving up the kiwi dollar.

“Modest inflation pressures suggest the expansion can be sustained for longer than previously expected with a more gradual increase in interest rates,” Wheeler said in today’s monetary policy statement, where he held the official cash rate unchanged at 3.5 percent as expected.
“Some further increase in the OCR is expected to be required at a later stage.”The New Zealand dollar jumped as high as 78.25 US cents, from 76.85 cents immediately before the 9am statement, and was recently trading at 78.10 cents.

The central bank “reinforced its explicit tightening bias – a hawkish surprise to the markets,” said Imre Speizer, strategist at Westpac Banking Corp.Wheeler lowered the track for the 90-day bank bills, seen as a proxy for the OCR, by 30 basis points, adding to the 0.5 of a percentage reduction by which the bank lowered its expectations in September.

The central bank also trimmed its forecast for gross domestic product in the year ending March 31, 2015, to 3.5 percent from the 3.6 percent rate seen three months ago.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com