By Wayne Cole
SYDNEY, Oct 5 – New Zealand’s central bank on Wednesday raised interest rates to the highest level in seven years, pledging more aggressive measures. Inflation in the overstretched economy was up 50 basis points to 3.5%, the fifth increase of this amount and the eighth rate hike in 12 months.
Given the extreme price pressures in the economy, the panel debated whether to hike by 75 basis points. But the solution was found in a half-point move.
“The Committee agreed that it is appropriate to continue to tighten monetary conditions at the pace necessary to maintain price stability and contribute to maximum sustainable employment,” it said. RBNZAdrian Orr.
“Underlying consumer price inflation is very high and labor resources are scarce.”
It differs from aggressive tone. The worst turn came from the Reserve Bank of Australia, which backed away from a quarter-point hike at its policy meeting on Tuesday.
Investors saw the New Zealand dollar rise 0.9% to US$0.5782, while the two-year exchange rate rose 6 basis points to 4.51%. It fell 25 basis points on Tuesday, the biggest daily drop since 2001.
Markets in more than 60% opportunities RBNZ There is a chance to raise another one. They expect rates to be 4.5% in May, up 50 basis points at the next meeting in November.
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