The Reserve Bank of New Zealand (RBNZ) has raised the official cash rate to a seven-year high in a bid to control inflation.
The rate was raised by half a percentage point, up to 3 per cent.
The RBNZ stood by its aggressive approach to tackling inflation, which is currently at a 30-year high of 7.3 per cent.
“It remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment,” it said.
“Core consumer price inflation remains too high and labour resources remain scarce.
The RBNZ indicated several domestic drivers of inflation, including a tight labour market.
“Production is being constrained by acute labour shortages, heightened by seasonal and Covid-19 related illnesses. In these circumstances, spending and investment continues to outstrip supply capacity, and wage pressures are heightened. A range of indicators highlight broad-based domestic pricing pressures.”
It said global inflation was still being driven by a number of factors, including Covid-19-related supply chain disruptions and the war in Ukraine.
The bank forecasted further cash rate rises, likely in October and November, to at least 3.75 per cent and possibly going as high as 4.25 per cent by the middle of 2023.
