2010.08.3101:37:00UTC+00New Zealand Central Bank To Hold Key Rate At 3% Until March 2011: NZIER

New Zealand's central bank will retain the interest rate at 3% until March 2011, the New Zealand Institute of Economic Research said in its September 2010 Quarterly Predictions on Tuesday.

Interest rates for households and businesses are much higher than the official cash rate or wholesale interest rates. This is strangling the recovery and there is little growth in borrowing, said NZIER's Principal Economist Shamubeel Eaqub.

The research institute expects the Reserve Bank of New Zealand to raise the interest rate to 5.5% by early 2012 after holding the rate at 3% until March 2011. Rates are likely to rise earlier in 2011 if the recovery strengthens.

The economy is forecast to grow 2.2% this year. But it is projected to ease to 1.2% next year, before rebounding to 2.9% in 2012. The institute's economic assessment reflects a cautious attitude from households and businesses, slowing net migration, and an impending slump in non-residential construction.

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