By Stephen Wright
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.
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