RBNZ says moderate rate rises needed and preferable

WELLINGTON, March 14 Thu Mar 13, 2014 3:03pm EDT

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WELLINGTON, March 14 (Reuters) - A series of moderate interest rate rises is needed and will be better for the New Zealand economy over the next two years rather than being delayed, a central bank official said on Friday.

The Reserve Bank of New Zealand (RBNZ) raised its benchmark rate by 25 basis points to 2.75 percent on Thursday, as widely expected, after three years on hold, to keep inflation pressures from the strongly growing economy in check.

"We understand higher interest rates can be a little difficult, but far better to have moderate increases today than very, very large increases next year," Assistant RBNZ Governor John McDermott told Radio New Zealand.

He said the RBNZ was expected to be raising rates gradually over the next 18 months to two years.

McDermott also said limits on high risk, low deposit house loans, imposed last year, were containing house price inflation, but it was too early to say if or when they might be lifted.

(Gyles Beckford)

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