N.Z. Trade to Underpin Currency, May Fan Inflation, Bollard Says

New Zealand’s economy will get a boost from higher farm export prices that will underpin the nation’s currency and may feed inflation expectations which the central bank would need to counter, Reserve Bank Governor Alan Bollard said.

“If households and firms use the income boost from higher commodity prices and exchange rates to bring forward consumption and investment, or increase borrowing, then pressure on resources in New Zealand would lead to more inflationary pressure,” Bollard told a farmers group in Ashburton on the South Island yesterday. “Monetary policy would need to counteract any rise in inflation expectations.”