New Zealand set to fight inflation, raises interest rate to 4.25%

By Garima Soni  | Date: 2022-11-23

New Zealand set to fight inflation, raises interest rate to 4.25%

The central bank of New Zealand has reportedly intensified its campaign against rising prices by boosting its benchmark interest rate to its peak point in more than 13 years. The key rate of interest set by the Reserve Bank of New Zealand (RBNZ) increased by 0.75 percentage points to 4.25%.

Since the rate, also known as the official cash rate, was implemented in 1999, that has been the largest growth.

Notably, it happens after the nation's annual inflation rate for the three months ending in September was 7.2%.

As the global economy recovers from the pandemic and the conflict in Ukraine drives up the price of food and gas, New Zealand has experienced a substantial increase in the cost of living, similar to the world as a whole.

Latest predictions by experts assert that the countrys economy is expected to enter a crisis in September of next year. A recession is typically thought to occur when the economy contracts for two consecutive quarters of three months.

The Reserve Bank of the country asserted that an economic recession is anticipated because the economy is launching from a place of very rampant inflation and severe labor constraints. Curtailing interest rate hikes in the near future in an effort to prevent a recession would probably result in a lengthier period of high inflation. Consequently, in order to return inflation and employment to a more stable footing, increased interest rates, and a deeper shrinkage would eventually be needed.

The RBNZ Monetary Policy Committee will alter its opinions if the circumstances change. However, the reality is that rising inflation appears to be here to stay, and procrastination would simply make the issue worse.

Grant Robertson, the finance minister for New Zealand, stated during a parliamentary hearing on Wednesday i.e., 22nd November that 2023 will be the year of reckoning for the global economy.

It is worth mentioning the New Zealand currency rose against the US dollar to a three-month high following the RBNZ interest rate decision.

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About Author

Garima Soni

Garima Soni

Despite starting her career in science, Garima always had a zeal for writing. She started out her writer journey as a freelancer which eventually turned into a full-time job. Now as an upcoming MBA professional, Garima pens down articles for BonafideNews and several o...

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