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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.
Free AccessMNI BRIEF: Beijing To Protect Firms From U.S. Bill - MOFCOM
MNI BRIEF: SNB Cuts Policy Rate By 50 BP To 0.5%
MNI EUROPEAN MARKETS ANALYSIS: ECB Expected To Cut Rates Later
MNI INTERVIEW: RBNZ Should Hike Rates, Ex Chair Grimes Says
The reintroduction of limits on mortgage borrowing will have no effect on New Zealand's overheated housing market and the country's central bank should raise interest rates, former Reserve Bank of New Zealand chairman Arthur Grimes told MNI, adding that he expected his advice to be ignored.
Grimes, RBNZ chairman from 2003 to 2013 after previously serving as chief economist, said in an interview that the current cash rate of 0.25% was pumping up property.
"In a low interest rate environment with a lack of returns from other investments, the main impact of the low rates is to drive house prices, and that is an increasing risk to financial stability," he said.
"The low rates don't have much effect on business, they couldn't care less if they borrow at 1% or 3%, it doesn't make a big difference to them."
LENDING RESTRICTIONS
Grimes warned on house prices last year in an interview with MNI, shortly before the government issued an open letter to the RBNZ expressing concern over the issue
He told MNI that while he doubted the RBNZ would raise rates, he "hoped they don't exacerbate what they have done" and cut them further.
This week, the RBNZ said it would reintroduce lending restrictions suspended at the beginning of the Covid-19 pandemic, citing "speculative" borrowing. Loan-to-value ratios exceeding 80% will be limited to a maximum 20% of new owner-occupier mortgages from March 1. Grimes dismissed the move as immaterial.
"People just get around LVRs by borrowing from their parents' equity," Grimes said, "I doubt that move by the RBNZ will do anything."
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.