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Wheeler's words watched in rate review

Thursday 31 Jan 2013 6:03 a.m.

Reserve Bank Graeme Wheeler

Reserve Bank Graeme Wheeler

Even if the Reserve Bank keeps the official cash rate at 2.5 percent as expected, struggling exporters hope governor Graeme Wheeler says nothing to spur the kiwi dollar higher.

The OCR review on Thursday morning follows the first hearings of a parliamentary inquiry into manufacturing, where bosses and union leaders have all blamed the high kiwi dollar for job losses in the sector.

While the cash rate has been kept at its historic low of 2.5 per cent since March 2011, currency market analysts say Mr Wheeler may need to be more "dovish" in his comments about future interest rate movements than he was in his December statement.

"The RBNZ will need to be careful that it does not again pressure the New Zealand dollar higher with inferences of eventual higher interest rates, as it did in December," Derek Rankin at Rankin Treasury said.

The Green Party on Wednesday urged Mr Wheeler to lower the OCR to take the pressure off the exchange rate and protect jobs in exporting and manufacturing.

Co-leader Russel Norman says inflation is running below expectations and the New Zealand dollar is trading at near record levels.

"The governor can't continue to sit on his hands while the runaway dollar leads to job losses and reduces the competitiveness of our export sector," he said.

But members of New Zealand Institute of Economic Research's "shadow board" expect the rate to be kept on hold - in line with the view of most economists.

The OCR is the central bank's main tool to influence the level of New Zealand's economic activity and inflation.

NZN

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