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Wednesday, April 1

Long-term interest rates out of line with RBNZ expectations

Reserve Bank Governor Alan Bollard today expressed concern over the recent strength of long-term wholesale interest rates.

"As we said in our 12 March Monetary Policy Statement, the economic recovery is expected to be very gradual. Furthermore, the risks around the outlook continue to be weighted to the downside," Dr Bollard said in a statement.

"In these circumstances we believe the rise in longer-term interest rates is unwarranted and inconsistent with the monetary policy outlook.

"As indicated in our March Statement, we are projecting interest rates to remain at relatively low levels for an extended period."

Dr Bollard said that if this apparent distortion persists, it could put unnecessary pressure on the cost of borrowing by firms and households.

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