Investing.com - The Reserve Bank of New Zealand Thursday kept its official cash rate at 2.5% as expected, while warning that inflation pressures are starting to build and it will increase interest rates as needed to keep within its inflation target of 1% to 3%.
It is becoming unnecessary to maintain the current degree of monetary stimulus," the Reserve Bank said in its quarterly monetary policy statement.
The statement listed "momentum in the housing market and construction sector" and the degree to which it "spills over into the broader demand and inflation pressures" as the main drivers of a shift in stance.
"Annual CPI inflation increased to 1.4% in the September quarter and inflation pressures are projected to increase," Governor Graeme Wheeler said.
"The extent and timing of such pressures will depend largely on movements in the exchange rate, changes in commodity prices, and the degree to which momentum in the housing market and construction activity spills over into broader cost and price pressures," he added.
"The bank will increase the OCR as needed in order to keep future average inflation near the 2% target midpoint."
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