Reserve Bank Governor Alan Bollard took the unusual step on Wednesday of saying he was concerned about the sharp rise in long term interest rates in recent weeks, saying they were "out of line with Reserve Bank expectations." (Updated to include Kiwi dollar's slump immediately after the warning)
The New Zealand dollar dropped more than a cent to 55.8 USc in the few minutes after the Governor's statement was issued at 9am.
Here is the full (jawboning) statement below.
"Reserve Bank Governor Alan Bollard today expressed concern over the recent strength of long-term wholesale interest rates.
"As we said in our 12 March Monetary Policy Statement, the economic recovery is expected to be very gradual. Furthermore, the risks around the outlook continue to be weighted to the downside," Dr Bollard said in a statement.
"In these circumstances we believe the rise in longer-term interest rates is unwarranted and inconsistent with the monetary policy outlook.
"As indicated in our March Statement, we are projecting interest rates to remain at relatively low levels for an extended period."
Dr Bollard said that if this apparent distortion persists, it could put unnecessary pressure on the cost of borrowing by firms and households.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.