Bank of New Zealand to raise interest rates above 4% to curb inflation

The Reserve Bank of New Zealand (RBNZ) plans to raise its policy rate to 4.25%, although it is not clear to what extent monetary tightening is needed to curb inflation.

The Reserve Bank of New Zealand’s deputy governor said the RBNZ expects the policy rate to peak at 4.1% by mid-2023.

“We’re still not sure where the policy rate will go, maybe 4% or 4.25%,” said the Reserve Bank of New Zealand’s deputy governor.

The RBNZ wants the policy rate to be well above the midpoint. This would slow the economy and curb inflationary pressures, but it acknowledged that the mid-level could be higher than the previous estimate of 2%.

The RBNZ decided last week to raise the key interest rate from 2.5% to 3%. It stated that it was still appropriate to raise interest rates further quickly.

In addition, the Deputy Governor of the Reserve Bank of New Zealand stated that the New Zealand economy is more resilient than we had previously thought. Domestic consumption and demand have risen more strongly than in the business and consumer confidence surveys.

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