New Zealand’s Reserve Bank has warned that inflationary pressures may result in further interest rate rises.

In order to curb inflation, the Reserve Bank has raised interest rates repeatedly in recent times.

The bank notes that currently:

• Household spending continues to show surprising resilience.
• The labour market remains very firm, with continued strong growth in incomes.
• There has been some improvement in business and consumer confidence.
• The housing market appears to have developed new momentum after slowing in the first half of the year.
• Houses are now selling as fast as at any time this year.

Reserve Bank Governer Alan Bollard said:

“Our advice is to think about what would happen if interest rates were to go up and the economy was not so resilient.

“The risk that people are expecting that house prices will push up again is that in many cases, housing budgets will not support that.”

Mr. Bollard indicated that interest rates will stay high for the foreseeable future:

“Looking ahead, our projections and risk assessment suggest that a firmer monetary policy stance could still be required to maintain downward pressure on inflation in the medium term. Further tightening cannot therefore be ruled out. This will depend on economic outcomes and in particular the emerging trends in housing and domestic demand indicators. Any easing of policy must remain some considerable way off.”