10 Dec 2010

Economist predicts rate rises not likely before mid-2011

8:45 pm on 10 December 2010

ANZ Bank economist Khoon Goh says further interest rate rises are unlikely until the middle of next year, as the Reserve Bank awaits firm evidence that a robust economic recovery is under way.

As expected, the central bank left the Official Cash Rate on hold at 3% on Thursday, citing a reluctance among people and companies to spend or borrow.

Robust Asian demand for dairy products, the rebuilding of the Canterbury region following a devastating earthquake in September and the 2011 Rugby World Cup, to be held in New Zealand, is expected to bolster growth.

But the Reserve Bank says a subdued recovery is likely to mean fewer interest rate increases over the next two years.

Mr Goh says there are few signs the economy is strong enough to justify higher interest rates at present.