New Zealand Central Bank Surprises With 50 Basis Point Hike, Kiwi Soars
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WELLINGTON, NZ (Reuters) – New Zealand’s central bank raised its cash rate unexpectedly by 50 basis points on Wednesday to a record high of 5.25%. The bank reiterated that inflation is still persistently high.
In a Reuters survey, 22 out of 24 economists predicted that the Reserve Bank of New Zealand would only raise rates by 25 basis points. It is the 11th consecutive rate hike since October 2021, when the central bank began raising rates.
The statement stated that "the Committee agreed that the OCR needed to increase as previously indicated to return inflation within the target range of 1-3 percent over the medium-term."
New Zealand Dollar jumped to $0.6360, from $0.6305, after the surprise decision.
The RBNZ had indicated a 50-bp rate hike in April at its review of February. However, with the economic outlook becoming more gloomy, economists predicted a lower increase.
The central bank stated that, while the economic activity in the fourth quarter of 2008 was lower than expected and signs of capacity pressures decreasing were beginning to emerge, the demand for goods continues to outpace the supply of goods.
The report added that "employment is above its maximum sustainable level and inflation is persistently high."
The report said that the severe weather events of January and February led to higher prices on some goods and services. It also expects economic growth to be supported through rebuilding efforts.