Key Says New Zealand Interest Rates May Stay Lower for Longer

New Zealand interest rates may stay lower for longer as inflation slows, adding to upward price pressure in the housing market, according to Prime Minister John Key.

“There’s clearly renewed confidence in the economy,” Key told reporters Tuesday in Wellington. “Low interest rates, which are now much more likely to continue for longer, are encouraging people to get into the housing market.”

Key said the government is monitoring home sales, particularly in Auckland, home to a third of the nation’s 4.5 million people. Low borrowing costs are likely to fan housing demand and the government doesn’t want prices of dwellings to get out of control, he said, adding that policy makers are working to boost supply to address the issue.

The comments come two days before central bank Governor Graeme Wheeler’s first interest-rate announcement of the year. Ten of 13 economists surveyed by Bloomberg News forecast the official cash rate will remain at 3.5 percent until next year.

The New Zealand dollar bought 74.37 U.S. cents at 5:41 p.m. in Wellington after dropping as low as 74.09 cents after Key’s comment on interest rates.

The fall in oil prices which is slowing inflation is a “net win” for New Zealand, Key said. “It’s certainly going to positively impact on consumers both in terms of paying less at the pump and secondly with lower levels of imported inflation and that leads to lower interest rates.”

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