KEY POINTS:
If Finance Minister Michael Cullen wanted to talk the dollar down by pointedly reminding the markets of his power to override the Reserve Bank's price stability target, he must be disappointed.
It has remained above US79c, reflecting the markets' belief that Governor Alan Bollard is twice as likely to raise the official cash rate to 8.25 per cent on Thursday as he is to leave it unchanged.
"We don't for a moment believe the Finance Minister, with his strong awareness of New Zealand's economic history, is seriously contemplating either removing low inflation from the Reserve Bank's policy targets agreement or adding other explicit targets such as the exchange rate," said BNZ chief economist Tony Alexander.
"He knows full well the cost to our country in the past of high inflation and attempts to control the exchange rate. He almost certainly was simply trying to scare foreign punters a bit."
Goldman Sachs JB Were economist Shamubeel Eaqub said further interest rate-related appreciation of the kiwi dollar could "politicise" monetary policy.
So far the political threats had been merely for show, he said.
But the forthcoming finance and expenditure select committee hearing on monetary policy was an indication of increasing political focus on the issue, which would only increase with an election next year.
