Meeting broad market expectations, the Central Bank of New Zealand (RBNZ) raised interest rates by 50 basis points to 2.00% at a policy meeting held during the Asian session.
This is the fifth consecutive rate hike in the central bank’s efforts to combat persistent inflation at its highest level.
RBNZ policymakers told that a larger and earlier rise in its interest rates reduced the risk of inflation becoming persistent, while providing flexibility.
The central bank sees that the domestic economy remains strong on the back of a strong labor market, continued fiscal support and the easing of Covid-19 sanctions.
However, the RBNZ warns that there are still threats to the economy amid global uncertainty and price spikes.
Adding the central bank further, it agreed to continue to increase its official cash rate (OCR) at a rate that they are confident will bring consumer prices back to the target range.
It also added that the projected path in interest rate hikes is consistent with achieving inflation and employment objectives without causing instability.
Following the RBNZ decision, the New Zealand dollar surged and traded stronger at a three -week high against the US dollar.
