RB leaves interest rates unchanged

But Dr Bollard sided more towards Scrooge than Father Christmas in his outlook for interest rates.

Instead of a pattern of gradual rate relief starting next year, Dr Bollard stressed a further rate hike could not be ruled out.

This is despite the bank no longer expecting inflation to creep outside the 1-3 per cent target band - as had been forecast in September - and an economic slowdown being almost assured next year.

The bank is projecting the economy will expand by an impressive 5.2 per cent in calendar 2004 - that is much stronger than the 4.65 per cent the bank forecast in September.

"The tightening in monetary policy over the past year currently looks sufficient to keep medium-term inflation pressures in check," Dr Bollard said.

But with inflation expected to remain near the top of the target band there was "little headroom" to absorb further inflation pressures.

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