The Reserve Bank of New Zealand has held the Official Cash Rate as expected at 2.5 per cent, but has increased its forecast track for interest rates by around 50 basis points. It now sees short term interest rates rising around 200 basis points to 4.7 per cent through the two years from mid 2014. This would imply floating mortgage rates rise to around 7.5 per cent by early 2016 and suggests interest rates would rise around 100 basis points by the end of 2014 as next election approaches. The central bank warned again that house price and construction cost inflation could spill over into wider inflation pressures and it was likely to increase the OCR next year. Its forecasts for the 90 day bill rate suggest it has bought forward its first expected rate hike from the September quarter of 2014 to the June quarter. This remains less hawkish than market expectations for the first hike being in the March quarter of 2014 and for rate hikes over the next 3 years of 200 to 300 basis points. The bank also estimated that the limits on high loan to valuation ratio lending it is imposing from October 1 were "worth" around 30 basis points of interest rate increases. This implies the Reserve Bank would have increased its forecast track by around 80 basis points with a peak closer to five per cent by early 2016 than the 4.7 per cent currently forecast.