By James Glynn
The Reserve Bank of New Zealand raised its official cash rate by a further 50 basis points on Wednesday, citing continued inflation pressures across the economy.
The hike takes the official rate to 3.50%, and marks the fifth 50-basis-point rise in the current tightening cycle. Most economists expect the RBNZ will take the cash rate well above 4.0% before it is satisfied that inflation has been tamed.
The increase comes as other major central banks have made large rate increases to cool inflation despite growing recession risks. The exception to the recent hawkishness is the Reserve Bank of Australia, which announced a slowing in its pace of interest-rate increases on Tuesday.
"The committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment," the RBNZ said in a statement. "Core consumer price inflation is too high and labor resources are scarce."
Domestic spending has remained resilient in the face of slowing global growth and higher domestic interest rates, it added.
"Employment levels are high, and household balance sheets remain resilient despite the fall in house prices," the RBNZ said.
Labor shortages and wage pressures remain heightened across the economy, with a range of indicators continuing to highlight broad-based pricing pressures.
The RBNZ indicated that it expects to keep raising rates.
"Committee members agreed 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% target range," the statement said.
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