An economist says the Reserve Bank should hold off raising interest rates until the middle of the year because of the deteriorating global economy.
New Zealand Institute of Economic Research principal economist Shamubeel Eaqub says the economy is on the mend and should grow by 1.4% this year and 2.6% next year.
But he says weak global growth is threatening the recovery.
Mr Eaqub says an economic slowdown in Australia, renewed recession fears in the United States, and the sovereign debt crisis spreading across Europe will soften global growth.
He says the implications of that will be weaker export prices, fewer exports, fewer tourists and potentially more difficulty accessing credit.
Mr Eaqub says the Reserve Bank should therefore be more cautious about raising interest rates and it will probably be the middle of next year before there's enough of a recovery in New Zealand that rates can be raised.
He says it would be foolish for the Reserve Bank to raise rates soon. The Official Cash Rate is 2.5%, which was set on 10 March.
Mr Eaqub says the New Zealand dollar is very high and to raise rates while the dollar is high would further threaten the manufacturing export sector.
