8 Sep 2014

RBNZ likely to hold interest rates

9:03 am on 8 September 2014

The Reserve Bank is expected to hold interest rates steady at its regular review on Thursday but markets will be keen to see how much the central bank's forecasts have changed.

The central bank is expected to hold its official cash rate at 3.5 percent.

First NZ Capital director of economics Chris Green said the economic landscape had changed quite a lot since the central bank last published forecasts in June.

He said the key thing was the significant size of the decline in dairy auction prices and its likely flow-on effects in terms of a reduction in the size of the dairy payout for the 2015 year.

Mr Green said there had also been a softening in business and consumer sentiment and price inflation was soft in terms of the Consumer Price Index and house prices.

He said there had generally been a negative tone, but the one positive aspect was the strength of migration numbers.

Mr Green said the currency remained in the unjustified and unsustainable category that they called it previously.