New Zealand central bank hikes benchmark rate to 2.5 percent

Reserve Bank of New Zealand’s interest rate hike comes after rises in April and May.

New Zealand central bank building entrance.
A security guard stands in the main entrance to the Reserve Bank of New Zealand located in central Wellington, New Zealand, on July 3, 2017 [File: David Gray/Reuters]

New Zealand’s central bank on Wednesday lifted its benchmark interest rate by half a percentage point to 2.5 percent as it attempts to curb inflation.

It was the third time this year that the Reserve Bank of New Zealand has lifted the cash rate by 50 basis points, following hikes in April and May. There was also a quarter percentage point rise in February.

The bank has forecast that the rate will peak at 4 percent late next year.

It said in a statement that it “remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and support maximum sustainable employment”.

New Zealand’s inflation is running at 6.9 percent and the unemployment rate is 3.2 percent.

The bank manipulates interest rates to try to contain inflation to a target band between 1 percent and 3 percent.

The bank will next consider raising the cash rate at its meeting on August 17.

The hike came as South Korea’s central bank, another of the region’s most hawkish banks, unveiled an historic half-point interest rate hike, lifting the benchmark rate to 2.25 percent.

Source: The Associated Press