The RBNZ Governor Wheeler gave a speech last week in Auckland where he defended the RBNZ’s policy decision to keep interest rates steady.

He said that there were significant downside risks to the outlook for the global economy, especially the protectionist policies from the new U.S. administration. On the domestic front, the RBNZ Governor highlighted the imbalances in the housing markets as the main risk.

Markets have been speculating on when the RBNZ will be hiking interest rates next. It is almost a certainty that the next policy change from the RBNZ will be a hike in interest rates, but it is now a question of when. The OCR is expected remain unchanged at 1.75%, when the RBNZ meets later this month.

Governor Wheeler reiterated the RBNZ’s policy statement from February noting that the central bank remained comfortable with its economic projections. The central bank forecast that the OCR will remain unchanged until 2019 but that the risks were equally balanced.

The RBNZ governor’s speech did not add anything new for the markets, which as a result saw a rather muted response. However, the fact remains that despite the recent uptick in inflation which has been encouraging, the RBNZ is unlikely to change its monetary policy.

On the domestic front, the central bank said that it was concerned with the imbalances surrounding the housing markets as house prices continued to rise steadily around Auckland which has been putting a squeeze on household incomes. The governor also warned on rising household debt which remains at historically high levels and noted the downside risks of the leverage against the housing assets.

Wheeler said that the housing market was at risk of a correction which could be triggered by a change in global conditions. The central bank is already looking at the increase in mortgage lending at the high debt-income areas which it expects to reign in with macro-prudential lending restrictions, which it expects will lessen the burden in the housing markets.