World

New Zealand raises prime interest rate to 4.75%

CHRISTCHURCH, New Zealand –

New Zealand’s central bank raised its benchmark interest rate by half a point on Wednesday to 4.75% as it continues to try to reduce inflation.

The increase, which could drive up borrowing costs for consumers on everything from credit cards to mortgages, comes despite the economic pain a devastating hurricane has inflicted on many. Over time, rebuilding the storm will only add to inflationary pressures, the bank said.

Hurricane Gabrielle hit New Zealand last week, killing 11 people and causing billions of dollars in damage to homes and infrastructure.

Reserve Bank Governor Adrian Orr said the committee that makes decisions on interest rates has agreed that the rate needed to increase is to ensure that inflation returns to the bank’s target of around 2% from the current level. currently 7.2%.

Orr said that while there are some early signs that price pressures are easing, core inflation remains too high and employment is at maximum sustainable levels, with unemployment at a low of 3 .4%.

“Hurricane Gabrielle and other recent extreme weather events have had a devastating impact on the lives of many New Zealanders,” Orr said. “It is too early to accurately assess the monetary policy impact of these weather events, as the scale of devastation and economic disruption is only becoming apparent.”

Orr said the committee believes the disaster is likely to increase prices for a number of commodities in the coming weeks, while also having a negative impact on economic activity and exports. He noted that the government has yet to determine the size and timing of its economic response to the storm.

The 0.5% rate hike comes after a record 0.75% gain in November. At 4.75%, the official cash rate is at its highest level since early 2009, shortly after the recession. global financial crisis.

The rate hike was in line with market expectations and the currency was little changed, with NZ$1 trading at around US$0.62.

The New Zealand prime rate is currently similar to the US interest rate from 4.5% to 4.75% but is higher in many other developed countries including neighboring Australia, where interest rates are 3. 35%.



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