By Lucy Craymer
WELLINGTON (Reuters) -The Reserve Bank of New Zealand Governor Adrian Orr said on Thursday the committee was confident in the level of restrictiveness of interest rates at the present point.
“They (interest rates) are well above what we would consider neutral, are constraining spending and investment,” Orr told the New Zealand government Finance and Expenditure Committee.
The Reserve Bank of New Zealand increased the cash rate by 25 basis point to 5.5% on Wednesday and released guidance that it did not expect to hike again after already having hiked the cash rate 500 basis points.
Orr added that there were indicators consumer spending and aggregate demand as a whole were easing and in some places were falling in real terms.
“The committee is confident monetary policy is restrictive and doing its job,” he said, but added the central bank never rules out the need to change that view.
Orr said there were risks that the central bank would need to raise rates due to sticky inflation expectations and continued government spending.
He added there were also downside risks including weaker-than-expected gross domestic product and a larger-than-expected impact as households as they roll over on to higher mortgage rates.
(Reporting by Lucy Craymer; Editing by Sonali Paul and Diane Craft)
