This is an important comment from Wheeler. One of the factors keeping the New Zealand dollar bid is the high interest rates there (amongst other factors, such as the inflow of capital from China). The RBNZ would like to cut rates but have been constrained by rising house prices. They don’t want to cut rates if it fuels further rapid house price appreciation.
This morning’s moves to increase the capital that must be held by banks against high loan-to-value ratio (LVR) mortgages is an effort to curb the rapidly rising prices on houses. It is what is referred to as a macro-prudential control.
The kiwi dollar has fallen since this comment from Wheeler. Currently 0.8437/32 from above 0.8450 earlier.
