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NZ $100 notes - Source: ONE News -
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Given the weak nature of New Zealand's economic recovery to date we were never going to see a hike in the official interest rate by the Reserve Bank today.
Likewise any change in the usual signal from the Bank about timing of future interest rate hikes was also pretty much a no brainer...
Dr Bollard even used the same word's as in January, "around the middle of 2010", to describe the timing for removing monetary policy stimulus.
What was interesting though was the signal from the Bank that the extent of future hikes could be reduced given the fact that retail banks have already pushed up the interest rates due to the higher costs of finding funding on international markets.
The Reserve Bank is expecting this trend to continue for a bit longer - therefore meaning that the retail banks are already doing some of the Reserve Bank's work and dampening down economic activity.
This is a positive for those who are using cheap floating rates at the moment as it suggests rates will take a little longer to move back to a normal footing than first thought.
At this stage somewhere around June still looks like the date for the first hike, with 90 day bank bill forecasts in the Monetary Policy Statement today suggesting floating rates could be somewhere around 7% by this time next year...
That gives borrowers a little more room to use the cheaper rates to their advantage and pay down principal on their loans.
