WELLINGTON, April 24, 2014 (AFP) – New Zealand’s central bank lifted interest rates for the second time in as many months on Thursday, saying it was necessary to contain inflation as an economic recovery gains momentum. The Reserve Bank of New Zealand raised the official cash rate (OCR) 0.25 points to 3.0 percent in a well-flagged move that was widely anticipated by market watchers, who predict rates will hit 4.5 percent by the end of next year.
The hike comes after New Zealand last month became the first advanced economy to tighten monetary policy since 2012, ending a three-year freeze when the benchmark rate rose to 2.75 percent from a record low of 2.5 percent.
Reserve Bank governor Graeme Wheeler said New Zealand’s farm-based economy “has considerable momentum” and grew an estimated 3.5 percent in the year to March, fuelled by high commodity prices and a strong housing market.
As a result, Wheeler said inflationary pressures were increasing and action was needed to keep price rises within the bank’s 1.0-3.0 percent target range over the next two years.
“By increasing the OCR as needed to keep future average inflation near the 2.0 percent target mid-point, the bank is seeking to ensure that the eco