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Economists give their views on Reserve Bank governor Alan Bollard's decision to keep the Official Cash Rate at 7.25 per cent:
UBS chief economist Robin Clements says Bollard came "as close as you can get to hiking interest rates without actually doing so."
"Clearly he still has his finger on the trigger."
Bollard is next due to review interest rates in March, and whether he does so or not will depend on jobs and employment data before then, says Clements.
"The risk in the near-term is that we might see more hikes."
Deutsche Bank chief economist Darren Gibbs says he is pleased the Reserve Bank seemed to recognise the pressures in the economy, but "perplexed" as to why it did not hike the cash rate.
"I think that all Dr Bollard has done today is to underwrite the currency to the cost of exporters. It looks like we'll just wait around for six more weeks and we'll get the rate hike we should have got at the end of last year," he says.
However, First NZ Capital chief economist Jason Wong says another hike is unlikely.
With inflation projected by the Reserve Bank forecast to drop in the coming months, Bollard should be able to wait to see what happens with domestic demand and housing - which he says have picked up recently.
"The bank can afford to wait and see how things develop."
But any cut is a long way off. Wong says Bollard won't cut the official cash rate from its current 7.25 per cent level until 2008.
And with the possibility that the kiwi dollar will drop later on this year and provide additional stimulus to the economy, it's hard to predict when in 2008 any cut in interest rates might come.
- NZHERALD STAFF / NZPA
