New Zealand central bank explains aggressive path after raising rates by 50 bps via Reuters

By Lucy Cramer

WELLINGTON, Aug 17 (Reuters) – New Zealand’s central bank announced its seventh consecutive interest rate hike on Wednesday, signaling a tighter path in coming months to curb persistent inflation.

The hawkish tone of the Reserve Bank of New Zealand (RBNZ) report, which warned that future hikes were expected, surprised some traders and sent stocks higher.

The RBNZ raised its official cash rate (OCR) by 50 basis points to 3.0%, as expected, a level not seen since September 2015, and more importantly, sees rates at 4.0% early next year rather than earlier. 3.7% projection

Wednesday’s fourth consecutive 50-basis-point hike, along with previous smaller hikes, lifted the rate to a record low of 0.25% in October, marking the central bank’s most aggressive tightening since 1999.

“The Committee agreed to further advance the timing of interest rate hikes as domestic inflationary pressures have increased since May,” the central bank said in a statement.

The RBNZ raised its forecast high for the spot rate to 4.1%, where it expects it to remain until 2024.

(Reporting by Lucy Kramer in Wellington; Additional reporting by Wayne Cole in Sydney; Editing by Sri Navaratnam; Translation by Jose Muñoz in the Gdansk newsroom)