The Reserve Bank of New Zealand has stuck to its hawkish forecasts for another 150 basis points of rate hikes over the next 18 months, surprising markets and pushing the New Zealand dollar to a fresh two-month high.The Reserve Bank hiked its official cash rate on Thursday for the third time in three months to 3.25 per cent and forecast it was likely to raise it towards five per cent by the end of 2015.The bank is out of step with central banks in other developed economies, but only because New Zealand's economy is forecast to grow at a rate of 3.5 per cent over the next year, well above its estimated productive capacity of 2.75 per cent.The central bank said the rebuild of the quake-hit city of Christchurch and a building boom in Auckland is powering the economy and inflation higher, along with record high payouts to dairy farmers and double-digit house price inflation.The hawkishness of the Reserve Bank's comments and forecasts surprised some economists who had been predicting the bank would pause to assess the impact of the first three hikes. A stubbornly high New Zealand dollar and a sharp drop in dairy product and log prices since February had convinced some that the Reserve Bank would lower its forecast track for interest rate increases.But the bank was staunch in saying higher than expected net migration and strong jobs growth was keeping the pressure on inflation in the non-tradable sector.Reserve Bank Governor Graeme Wheeler repeated his view that the New Zealand dollar remained unsustainably high in the face of the sharp fall in commodity prices in recent months, but he stopped short of threatening intervention, which he did in a speech last month.He cited record low and falling short and long term interest rates in developed economies, which made the New Zealand dollar's interest rate differentials appear increasingly attractive. He also voiced his frustration that a fall in longer term wholesale rates and cheap bank funding in recent months has triggered a rash of fixed mortgage rate reductions by increasingly competitive banks. Two and three year fixed rates have fallen around 80 bps below floating mortgage rates in recent weeks."To be blunt, we would like to see a lower exchange rate and higher long term interest rates. Higher long term interest rates would assist our objectives on the housing market, but a lot of that is driven by what is happening offshore," Wheeler told a news conference. He pointed to a fall in Spanish and French ten year bond yields to 250 year lows and below US yields. "That's the sort of pressures that you're facing in terms of international financial flows, and that's putting downward pressure on long term interest rates."However, Wheeler remained confident that the Reserve Bank's monetary policy would get the necessary traction through mortgage rate increases. The weighted average time to re-price mortgages is around 9.9 months, well below the peak 19.9 months seen in late 2007 when the high incidence of longer term