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Reserve Bank of New Zealand Governor Graeme Wheeler said Friday he does not see any need to intervene in the currency market at the moment, despite a "very high" exchange rate.
New Zealand has "a very high exchange rate which is close to historic highs," Wheeler said in an interview to Radio New Zealand.
Also, the country faces over-inflated house prices, particularly in Auckland, and rising inflation so the Reserve Bank will need to increase interest rates at some time next year, he said. The bank's forward guidance and monetary policy statement suggests it will raise the official cash rate by about 2 percent.
However, Wheeler said whether the bank can delay the increase in interest rates will depend on the extent to which we can slowdown house price inflation and on the transfer of demand pressure that feeds through to consumer price inflation.
"If house price inflation slows, the Reserve Bank will not have to raise interest rates by quite so much," Wheeler noted.
"So increasing interest rates, to some extent it's built into investor portfolios expectations, if you like, or the expectations of investors, but it would put upward pressure on the exchange rate and damage our traded goods sector and we're quite concerned about that risk," the policymaker said.
