The Reserve Bank of New Zealand (RBNZ) raised its benchmark interest rate by 0.50% to 2.0%, its fifth consecutive rate hike, in an effort to curb inflation. The central bank also signaled that it would raise rates to a higher level than previously expected.
“The central bank tends to adjust interest rates to a higher, faster-than-expected level to reduce inflation risk. At the same time, the central bank will pursue a more flexible monetary policy amid global economic uncertainty,”the RBNZ said in a statement.
The announcement of a rate hike today pushed New Zealand’s interest rates to their highest level since November 2016. The RBNZ was among the world’s leading central banks to abandon the massive stimulus measures it had adopted during the coronavirus pandemic in order to curb the current steep inflation.
The RBNZ expects New Zealand inflation to reach 7% in the second quarter, well above the RBNZ target of 1-3%.