Economists surprised by Wheeler's hawkish tone

As expected, Reserve Bank Governor Graeme Wheeler kept the OCR at 2.5% this morning.

But it’s the comments he made about increasing business confidence and construction activity that have some thinking he’s signalling a move in the rate will happen sooner than had been expected.

Wheeler said: “Global growth is set to recover in 2013 with economic indicators improving in many of our trading partners. Consistent with this, global financial market sentiment is positive, contributing to lower bank funding costs and some reduction in interest rates faced by households and firms in New Zealand.”

Dominick Stephens, Westpac chief economist, said Wheeler seemed very bullish about the prospects for economic growth, and interest rates has risen slightly in response. He said Westpac was predicting an OCR increase in December, which was earlier than most other commentators, and this announcement had reaffirmed his opinion.