-Grant Spencer, RBNZ Deputy Governor
New Zealand has become a first developed country to start raising interest rates, and despite two consecutive rate hikes, analysts still believe the central bank will adjust its monetary policy twice over the next three months. We can see more changes in the RBNZ's strategy, as the nation's main opposition party urged for changes, while Westpac economists see some shifts as well.
The Reserve Bank of New Zealand is likely to introduce a loosening of its "speed limits" on high loan-to-value lending, most preferably this month. The central bank is expected to recalibrate the limit by aiming at the goal of original 15% target. Restrictions have been implement in October, and they mean domestic banks are limited to committing no more than 10% of their mortgage lending to clients with high loan-to-value ratio. Just recently the central bank expressed its concerns at how low the levels of high– LVR lending had fallen, with some analysts mentioning lower than projected use of exemptions as the main reason. The RBNZ will unveil its Financial Stability Report on May 14 and it can be the perfect timing to make any changes to the LVR regime.
Also this week the main opposition party said the central bank should broaden its targets as well as add a compulsory savings rate in order to take pressure off interest rates and the kiwi.
© Dukascopy Bank SA