Home Interest rate New Zealand hikes interest rates, more tightening to come

New Zealand hikes interest rates, more tightening to come


WELLINGTON, Oct.6 (Reuters) – New Zealand’s central bank on Wednesday raised interest rates for the first time in seven years and announced further tightening ahead, as it seeks to slow its domestic economy and a burning real estate market.

The 25 basis point rate hike marks the start of a tightening cycle that was supposed to start in August, but was delayed after an outbreak of the Delta coronavirus variant and an ongoing lockdown in its largest city, Auckland .

The Reserve Bank of New Zealand’s (RBNZ) spot rate hike to 0.50% was predicted by all 20 economists polled by Reuters.

The New Zealand dollar edged down to $ 0.6949 as markets fully integrated a 25 basis point increase.

“The Committee noted that further removal of monetary policy stimulus is expected over time, with future measures contingent on medium-term inflation and employment prospects,” RBNZ said, announcing her decision.

The rate hike puts New Zealand ahead of most other developed economy countries as central banks seek to cut emergency borrowing costs, although countries like Norway, the Czech Republic and Korea South have already raised their rates.

In neighboring Australia, the central bank kept interest rates at an all-time high of 0.1% for the 11th consecutive month on Tuesday.

New Zealand economists expect the benchmark rate to reach 1.50% by the end of next year and 1.75% by the end of 2023, according to the Reuters poll.

The South Pacific nation has experienced a rapid economic recovery from a recession last year, in part because it wiped out the coronavirus and reopened its economy before others.

Reporting by Praveen Menon; edited by Richard Pullin

Our Standards: Thomson Reuters Trust Principles.


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