The Reserve Bank of New Zealand raises interest rates by 50 basis points to 5.25%


The Monetary Policy Committee of the Reserve Bank of New Zealand has decided to raise the reference interest rate for its operations by 50 basis points, which will stand at 5.25%, its highest level since the end of 2008.

This is the eleventh consecutive rise in the price of money adopted by the Committee, which has increased the reference interest rate by 500 basis points since October 2021.

“The Committee agreed on the need to increase the official cash rate, as already indicated, to return inflation to the range of 1-3% in the medium term”, the body responsible for the monetary policy of the ocean country. “Inflation is still very high and persistent. In addition, employment is beyond its maximum sustainable level ”, he completed.

However, the Reserve Bank has judged that the levels of economic activity in the December quarter were lower than anticipated, suggesting that the economy is cooling off. Even so, he stated, the demand “clearly” exceeds the capacity of the supply, which “sustains the pressure on annual inflation.”

On the other hand, the entity has emphasized the robustness of the New Zealand financial system in times of “stock market volatility” on account of the bankruptcy of Silicon Valley Bank and the merger of Credit Suisse and UBS.

As for future projections, the central bank has predicted a weakening of economic growth in 2023 due to the global slowdown, less residential construction and the effects of the restrictive monetary policy undertaken.

The slackness of the world economy will lead to a weaker external demand for the main exported raw materials, while the rise in tourism will “partially offset” this drop in income.

The next meeting of the Committee to update interest rates will be held on May 23.