Investing.com - New Zealand housing market prices and the exchange rate are important variables for the pace and timing of interest rate hikes, Reserve Bank of New Zealand Deputy Governor Grant Spencer said Friday.
"We've started raising the Official Cash Rate, with the aim of forestalling general inflation pressures in the broader economy," Spencer said in a speech prepared for delivery in Auckland, on New Zealand's housing market. "Floating mortgage rates could be 7% to 8% in two years' time, closer to their average of the past 20 years."
But, he said, "The extent and timing of interest rate increases will depend on a number of uncertain variables, in particular the exchange rate and housing market pressures."
The RBNZ has raised the OCR 25 basis points twice since March to 3.00% now.
"A big uncertainty is the future path of the exchange rate, which has a major bearing on traded goods prices and overall economic activity," he said."The more downward pressure that the exchange rate exerts on prices and activity, the less pressure will need to be exerted by interest rates."