RBNZ Hikes Rates, Warns Further Increases May Be Hard

The Reserve Bank of New Zealand (RBNZ) raised interest rates by 25 basis points to 3.75%, in line with market expectations, as it seeks to control inflation and support growth.

Price pressures have intensified, with inflation accelerating to 4.1% year-over-year in the second quarter, exceeding forecasts and marking the fastest pace in over two years.

The RBNZ expects CPI to have peaked but does not see a return below 3% this year, which is within its 1-3% target range.

Despite being a net importer of oil, New Zealand's economy remains vulnerable to global energy shocks. The central bank warned that further rate hikes may be challenging in the near-term, with projections pointing to an OCR (overnight cash rate) topping out at 3.2% next year.