By Stephen Wright
WELLINGTON, New Zealand--The Reserve Bank of New Zealand raised its benchmark interest rate by 50 basis points for a second consecutive meeting and forecast a higher peak for interest rates as central banks globally try to stifle inflation.
The RBNZ's rate increase Wednesday lifted the cash rate to 2.0% from 1.5% and followed an increase of the same size in April.
The central bank forecast the cash rate to reach 3.4% by the end of this year and 3.9% in the April-June quarter of 2023. Previously it had forecast the cash rate to reach 2.2% in the final quarter of this year and peak at about 3.4% in 2024.
The monetary policy committee "agreed that stabilising inflation is its priority," RBNZ said in a summary of meeting's minutes.
"Members agreed that raising the OCR (Official Cash Rate) by more and sooner was consistent with avoiding higher future costs to employment and the economy in general as a result of high inflation," the statement said.
The central bank started raising interest rates in October last year, following about 18 months of holding its cash rate at a record low of 0.25% in response to the Covid-19 pandemic.
The RBNZ is carrying out its most aggressive tightening cycle in a generation, reflecting the challenges brought on by extensive monetary and fiscal stimulus, snarled global supply chains and elevated prices for energy and other commodities following Russia's invasion of Ukraine.
New Zealand's consumer prices jumped 6.9% from a year earlier in the January-March quarter, the largest increase in three decades.
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