New Zealand central bank lifts base rate from record low

Wellington (AFP) –

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New Zealand's central bank lifted its base interest rate 0.25 points to 0.5 percent Wednesday, ending an 18-month freeze prompted by the coronavirus pandemic as it bids to control inflation.

The Reserve Bank of New Zealand cited a recovering global economy linked to increased international mobility due to rising vaccination rates in making its decision.

"While economic uncertainty remains elevated due to the prevalent impact of Covid-19, cost pressures are becoming more persistent and some central banks have started the process of reducing monetary policy stimulus," it said.

The bank said New Zealand's inflation rate was set to rise above 4.0 percent in the medium term, exceeding its 1.0-3.0 percent target range.

"It is appropriate to continue reducing the level of monetary stimulus so as to maintain low inflation and support maximum sustainable employment," it added.

The base rate had been at a record low of 0.25 percent since March 2020.

The rise had been widely flagged by the bank but was delayed in August when the country was plunged into a national lockdown due to a Covid-19 outbreak.

The virus has since been contained to Auckland and the bank signalled further increases were likely.

"Further removal of monetary policy stimulus is expected over time, with future moves contingent on the medium-term outlook for inflation and employment," it said.