9 Mar 2013

ASB expects OCR to remain at 2.5%

1:40 pm on 9 March 2013

ASB economists expect the official cash rate to remain unchanged at 2.5% next week, amid concerns over the cost of the drought and a weak job market.

The bank's latest forecast also flags growing risks in the housing market and the high New Zealand dollar which is slowing exports.

It expects the dollar to remain high, presenting ongoing difficulties for exporters, though it will ease inflation.

The forecast warns low interest rates are driving strong demand for home loans, and helping push up prices, particularly in Auckland and Christchurch, where housing shortages are becoming acute.

Despite this, ASB expects the Reserve Bank to keep the OCR at its present level until March 2014.