The Reserve Bank of New Zealand is likely to keep its official cash rate unchanged until the end of 2013, and will keep it low next year, despite worries that the housing market may be showing signs of overheating, Capital Economics Asia Economist Daniel Martin said.
According to Capital Economics, a hike will become more likely in early 2014 as the currency possibly continues to slide and the global economy picks up.
The growing momentum in New Zealand's housing market, which is a concern for the central bank, has not yet reached dangerous levels. Even if the housing market overheats, the bank is likely to respond, at least initially, with macro-prudential tightening rather than a rate-hike, the firm said.
The RBNZ kept its policy interest rate unchanged at 2.5 percent at its latest meeting, as expected. The last time the bank made changes to the rate was in March 2011, when it slashed following the Christchurch earthquake.
The economist noted the central bank is also likely to wait further for the strong New Zealand dollar to weaken - giving boost to the country's exports - before engaging in a rate hike.
Capital Economics expects the New Zealand economy to grow 2.5 percent this year and 2.8 percent in 2014. Going ahead, however, the outlook for the economy remains subdued as fiscal tightening will largely offset the boost from rebuilding in Canterbury over the next two years.
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