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Source: ONE News -
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Fears overseas that interest rates will rise as economies show signs of improvement is something New Zealand may have to consider, business commentator Brian Gaynor says.
US government debt prices fell on Monday in the US on fears the Federal Reserve will hike interest rates sooner than expected after last week's surprisingly strong jobs data.
The selling of bonds followed a steep sell-off on Friday after the US Labor Department said employers cut far fewer jobs in May than had been forecast, sparking speculation that a recession might end this year and later spur higher rates.
In New Zealand, Reserve Bank governor Alan Bollard will on Thursday deliver his monetary policy statement.
While Gaynor does not expect Bollard will increase the official cash rate - currently sitting at an historic low of 2.5% - he says New Zealand may have to brace itself for higher interest rates in the future.
"It's going to be one of the consequences of what we call these 'green shoots of recovery', you can't have it both ways," he says.
Gaynor says New Zealand does not want to mirror Japan which kept interest rates low during the 1990s and was consequently saddled with a stagnant economy.
"We don't want a Japanese situation, we want a recovery, and if we get a recovery I think it's inevitable that our interest rates are going to be higher," he says.
Meanwhile, market analyst Alexandra Dalzell says that while there are inflationary fears, the rising Kiwi dollar is the main concern.
She says further intervention in the OCR may be needed to help drive the currency down, which is currently sitting at around 62 US cents.
"It really has a detrimental effect on those export related stocks and if we want an export related and production related recovery, that's going to be challenging going forward," she says.
Dalzell says analysts will not only be looking at whether the
rate is cut on Thursday but also Bollard's commentary around
it.
