NZ cenbank says overvalued currency, houses main challenges
WELLINGTON, Sept 27
WELLINGTON, Sept 27 (Reuters) - New Zealand's central bank said its main policy challenges at present were coping with the high value of the currency and the rapid growth in house prices.
In the Reserve Bank of New Zealand's (RBNZ) annual report published on Friday, governor Graeme Wheeler highlighted the two issues.
"The two most significant challenges facing the Bank at present are the overvalued New Zealand dollar and overvalued housing market," Wheeler said in his report.
"The former is creating difficult headwinds for New Zealand's export and import substitution industries, although it has benefited purchasers of imported goods and services, and contributed significantly to the current low levels of inflation."
He said the rise in house prices was increasing risks to financial stability and the wider economy.
The RBNZ has repeatedly warned about the risks from both the currency and the housing market over the past year.
It has imposed limits on retail bank loans for low deposit-high value mortgages from next month.
The bank has held its cash rate at a record low 2.5 percent since April 2011, but in its monetary statement on Sept 12, indicated that it expects to start raising rates in the first half of next year.
(Gyles Beckford; Editing by Shri Navaratnam)
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