The Reserve Bank of New Zealand has warned it expects to increase the official cash rate by 225 basis points to 4.75 per cent by early 2016, starting as early as March or April next year.A hike then would make New Zealand the first OECD country to hike rates and stands in stark contrast with the Reserve Bank of Australia, which has been cutting interest rates. The diverging path for Trans-Tasman interest rates boosted the New Zealand dollar over 92 Australian cents to a five-year high on Thursday, which is boosting the Australian dollar profit outlooks for the big four Australian-owned banks in New Zealand.The RBNZ said the economy was showing considerable momentum and GDP growth of around three per cent was becoming self-sustaining, meaning the Reserve Bank needed to withdraw stimulus next year and the following year. The bank raised its forecast for short term interest rates over the next two and a half years by a further 10 basis points. It forecast in its December quarter Monetary Policy Statement that the 90-day bank bill rate, which is a proxy for the OCR, would rise from 2.7 per cent now to 4.8 per cent by the beginning of 2016. Later in a news conference, RBNZ governor Graeme Wheeler was more specific in saying he expected the OCR would rise 225 bps over the next nine quarters. He is grappling with nationwide house price inflation of 10 per cent (over 15 per cent in the biggest city of Auckland) after five years of record low rates. The rate track implies hikes will start near the end of the March quarter of next year and by around 100 bps by the end of 2014.  The bank cited a boom in dairy prices and strengthening domestic demand as construction surges in both Christchurch and Auckland. It also pointed to rising inward net migration as a factor boosting house prices and the economy more generally. This is driven partly by New Zealanders returning from Australia and fewer New Zealanders leaving for Australia as the jobs outlook softens in Australia.The bank said its high LVR speed limit should help slow house price inflation, but the data seen to date was limited.  The bank said the early signs were in line with its expectations it would reduce house price inflation by between one and four percentage points.RBNZ deputy governor Grant Spencer also said the bank was happy banks were complying with the spirit of the new policy.