10 Mar 2014

Interest rates set to rise on Thursday

8:20 am on 10 March 2014

Interest rates look certain to rise on Thursday when the Reserve Bank releases its latest monetary policy statement.

All 17 economists polled by Reuters are expecting Reserve Bank governor, Graeme Wheeler, to raise his official cash rate from its current record low at 2.5 percent.

All but one are expecting the OCR to rise to 2.75 percent but Shamubeel Eaqub at the Institute of Economic Research is expecting Mr Wheeler will raise it to 3 percent.

He says the Reserve Bank doesn't want to hit existing borrowers too hard but it wants to pull back on new lending.

Mr Eaqub says the best way to send a strong signal to existing borrowers to fix and protect themselves is to have a 50 basis point hike.

First NZ Capital economist Chris Green says the current very easy monetary conditions have passed their use-by date and he's expecting a 25 basis point rise each quarter of 2014.

He says the Reserve Bank is likely to take a cautionary approach rather than taking a more aggressive response.