New Zealand lifts rates again
(CNN) -- New Zealand's central bank has again moved to ease inflation pressures, raising its key interest rate by 0.25 percentage points to 6.0 percent -- a level last seen in April 2001.
Announcing the rise Thursday morning, Reserve Bank of New Zealand Governor Alan Bollard said the increase reflected a continued buoyant economy.
He said this was putting a strain on resource capacity and "hence leading to inflation pressures".
He warned of the possibility of another increase ahead, saying New Zealand's current economic strength may extend for longer than the bank thought in June, and further tightening "looks likely to be necessary".
The rate rise, the third since late April, was widely expected after a period of inaction from June 2003-April 2004, when the official cash rate stayed at 5.0 percent.
HSBC Australia/New Zealand chief economist John Edwards said Thursday's rise was "not surprising", but the central bank governor's explicit threat to raise rates again was.
Edwards said New Zealand's rate of 6 percent was now among the highest in the industrial world, and it was not entirely clear why Bollard thought further tightening was necessary.
"The statement is a bit tougher than we expected, and accordingly we now think there is a good change of a further 25bp increase with the September 9 Monetary Policy Statement," Edwards said in a commentary.
The New Zealand rate rise increases the disparity with its biggest trading partner Australia, which has kept its benchmark interest rate unchanged at 5.25 percent since December 2003.
New Zealand's economy has been performing strongly, though the central bank said Thursday there were signs of a slowdown in "some domestic sectors". But it said rising commodity prices meant export incomes were improving.
The stock market closed at a record high Wednesday of 2768.17 for the Top 50 index, up 0.44 percent. In Thursday trade it is down slightly at 2766.18.
The New Zealand dollar is trading at 63.18 U.S. cents, down from 70.97 U.S. cents on February 17 this year. That was close to its record high of 71.14 U.S. cents set on January 8, 1997.
