28 Jan 2015

Keep interest rates steady - NZIER

8:33 am on 28 January 2015

The New Zealand Institute of Economic Research (NZIER) is recommending interest rates stay as they are, despite inflation falling below one per cent.

Reserve Bank Governor Graeme Wheeler

Reserve Bank Governor Graeme Wheeler Photo: RNZ / Diego Opatowski

The official cash rate has stayed at 3.5 percent since September.

The institute's principal economist, Kirdan Lees, said many indicators continued to point to a strong economy and Auckland's house prices have begun to rise again.

Dr Lees said leading economists consulted by the institute said now was not the time to unwind last year's interest rate rises.

He told Morning Report there was a case for cutting the cash rate.

"But when we actually look at the economy, it's humming along. You're seeing growth of about 3-3.5 percent. Auckland's house prices are skyrocketing," he said.

"When you put those factors together, NZIER's shadow board was simply of the view that - on balance - it's appropriate to leave interest rates on hold right now."

The Reserve Bank, which sets the official cash rate eight times a year, is due to make its next announcement tomorrow.