12 Mar 2015

Dollar jumps following OCR call

2:59 pm on 12 March 2015

The New Zealand dollar has jumped against its US counterpart after the Reserve Bank left the Official Cash Rate (OCR) on hold at 3.5 percent, and signalled it would remain there for the next couple of years.

Reserve Bank Governor Graeme Wheeler

Reserve Bank Governor Graeme Wheeler Photo: RNZ / Diego Opatowski

The kiwi rose 1.5 cents to just over 73 US cents - from 71.89 to 73.05 - but has eased back slightly since then.

It also rose against the Australian dollar.

Reserve Bank Governor Graeme Wheeler said the economy was expected to grow at an annual rate of between 3 and 4 percent for the next two years, underpinned by construction activity and more people in work.

That won't provoke inflation pressures though, at least not this year.

Mr Wheeler said inflation was expected to fall to about zero in the March quarter and remain low this year due to the high dollar, low global inflation and recent falls in petrol prices.

He said where inflation expectations head will determine the next move in the cost of borrowing.

Dr Wheeler said rates were forecast to be on hold at 3.5 percent until 2017, although he was not ruling out a cut or a rise, depending on how the economy performed.

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