New Zealand central bank lifts interest rates

WELLINGTON, July 26, 2007 (AFP) – New Zealand’s central bank raised interest rates Thursday for the fourth successive time this year due to sustained inflationary pressures. “But easing is going to be a considerable time away unless the economy softens very rapidly.” Reserve Bank of New Zealand Governor Alan Bollard raised the official cash rate (OCR) by a quarter of a percentage point to 8.25 percent, one of the highest rates in the developed world.

But Bollard also said the latest hike might be the last in the current cycle, with high levels of borrowing by New Zealanders showing early signs of moderating.

“Provided they keep this up, and the pressure on resources continues to ease, we think the four successive OCR increases we have delivered will be sufficient to contain inflation,” Bollard said.

A rise in interest rates had been expected by most economists after inflation figures earlier this month showed inflation rose one percent in the June quarter compared to the previous three months.

The central bank has a mandate to keep annual inflation within a one to three percent band. Although annual inflation was only two percent in the June quarter, there