WELLINGTON, New Zealand — New Zealand’s central bank raised its benchmark interest rate by 50 basis points for a third consecutive meeting Wednesday, as it tries to dampen decades-high inflation, and vowed further increases.
The rate decision lifts the cash rate to 2.5% and is the Reserve Bank of New Zealand’s sixth increase since October when it raised the benchmark rate from a record-low 0.25%.
Central banks around the world, including the U.S. Federal Reserve, have become increasingly aggressive in their efforts to quell the inflation surge that was brought on by stimulus in response to the COVID-19 pandemic. South Korea’s central bank on Wednesday raised its benchmark rate by 50 basis points — its first-ever increase of that magnitude.
“Employment remains above its maximum sustainable level and the Reserve Bank’s core inflation measures are around 4 percent,” the RBNZ said in a statement.
The bank’s monetary policy committee “acknowledged there is a near-term upside risk to consumer price inflation and emerging medium-term downside risks to economic activity,” according to the statement.
The RBNZ said it remains “resolute” in its commitment to returning inflation to within a 1.0%-3.0% target range and would “continue to tighten monetary conditions at pace.”
New Zealand’s inflation rate reached a three-decade high of 6.9% in the first quarter, fueled by fiscal and monetary stimulus and global shipping disruptions.
The RBNZ’s projections from its monetary policy statement in May indicated that the cash rate could peak at about 4.0% by mid-2023. The central bank said those projections are still broadly consistent with achieving its policy goals.
The RBNZ will release new projections for the cash rate and economic indicators at its next policy statement in mid-August. Its decision Wednesday was a policy review, for which it provided only a short statement.