Prediction on $NZ value

Press, 24 March 1988, Page 32

Prediction on $NZ value

Business and Economic Research, Ltd, says in its latest quarterly predictions that it expects Government monetary policy will try-to ensure the kiwi dollar does not fall below US57c or US5Bc. This is provided the United States dollar is not unstable. /“If it were to fall further, it) could well move into the 40s (US4Oc) and in so doing cause significant inflation | problems for .< the Government,” BERL says. ! There are strong indications, BERL says, that the kiwi dollar is at or near its- ceiling. Domestic interest rates- are falling and the gap between domestic and overseas yields is expected to close during 1988. I “The economy is projected to move into a

i sharp; .contraction | and therefore reduce the demand' for credit, including offshore loans. Finally, the! market is even i more reliant upon the policy determination of the! Minister [of .Finance, and this is likely to I come under increasing stress in 1988 as the extent! of the econoi mic contraction increases pressure upon Cabinet from- caucusi and party. i Inevitably, [some ■' : comi promises will have to be struck and they will not be necessarily in accord with the prejudices, of the . financial markets.”! i In | BERL’s view, the middle of this:year'would , be when inflationary effects i from any .depreciation [would ibe 'minimal. However, thri Government would not want the kiwi to “fall out bf bed.”