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WELLINGTON, New Zealand — The Reserve Bank of New Zealand raised its benchmark interest rate by 50 basis points for a fourth consecutive time and said more monetary tightening is needed to control high inflation.
The central bank’s decision on Wednesday increased the official cash rate to 3.0% from 2.5%. The RBNZ’s cash rate is now at its highest in seven years and has been raised by 275 basis points since October, when it was at a record-low 0.25%.
The RBNZ’s policy committee said 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.”
Central banks have scrambled to raise interest rates this year as elevated inflation–which some initially played down as transitory–threatens to become entrenched in economies.
Prices for commodities and everyday consumer goods have soared worldwide due to stimulus policies brought on by the Covid-19 pandemic, global shipping disruptions and Russia’s war on Ukraine.
The RBNZ’s updated forecasts for the economy projected the cash rate to reach 4.0% by the first quarter of 2023. Its last forecast in May predicted an approximate 3.9% peak in the second quarter of 2023.
Consumer price inflation, which hit a three-decade high of 7.3% in the second quarter this year, won’t return to the 1.0%-3.0% target band until the second quarter of 2024, the RBNZ said.
