New Zealand’s central bank has unveiled its seventh consecutive interest rate hike to tame spiralling inflation, taking the benchmark rate to its highest level since 2015 while signalling more aggressive tightening.
The Reserve Bank of New Zealand (RBNZ) on Wednesday raised the official cash rate — which dictates the rate of interest of loans between commercial banks — by half a percentage point to 3 percent.
In a statement signalling hawkish intent for the coming months, the RBNZ said it expected the benchmark rate to reach 4 percent by early next year, up from a previous prediction of 3.7 percent. The central bank said it also expected the cash rate to peak above 4 percent and stay at that level into 2024.
“It remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment,” the central bank said.
“Committee members agreed that monetary conditions needed to continue to tighten until they are confident there is sufficient restraint on spending to bring inflation back within its 1-3 percent per annum target range.”
The latest hike comes after the RBNZ in July lifted the benchmark rate by half a percentage point, following identical hikes in April and May.
New Zealand’s consumer price index rose 7.3 percent in the June quarter year on year, taking inflation to a 32-year high.
The RBNZ has been among the region’s most aggressive central banks in seeking to rein in inflation, rapidly lifting the benchmark rate from a record low of 0.25 percent since October.
After outperforming most of its peers throughout the pandemic, New Zealand’s economy unexpectedly shrank 0.2 percent during the first quarter amid a surge in COVID-19 cases.