Kathmandu. New Zealand's central bank on Wednesday raised its official cash rate by 25 basis points to 2.75 percent. The bank took this decision after annual inflation rose to 4.1 percent in the June quarter. Rising fuel prices due to the ongoing conflict in the Middle East has been a major cause of rising inflation.
The Monetary Policy Committee of the Reserve Bank of New Zealand has said that it would be appropriate to gradually remove monetary stimulus to return inflation to the midpoint of the 2 percent target and to support economic growth and employment.
According to the committee, despite weak economic growth in the June quarter, New Zealand's economic recovery is likely to have resumed. Strong demand from trading partner countries and high export prices are supporting income growth and investment in export-dependent regions and provinces.
But weak income growth, job insecurity and stagnant house prices have kept pressure on household spending and residential investment. According to the committee, its impact is especially seen in the country's largest city, Auckland, and the capital, Wellington.
The committee expects the economic recovery to be stronger and broader in the coming days. He estimates that the export sector will remain flexible and household spending will increase gradually.
According to the committee, the labor market conditions will also improve as the economic recovery accelerates and the purchasing power of the people will increase after inflation returns to the midpoint of the 2 percent target. Further, further monetary policy decisions are said to depend on the Committee's assessment of the balance between risks to inflation over the medium term.
New Zealand Finance Minister Nicole Willis said in a statement, "Unlike some previous economic recovery phases, this recovery is driven by the export sector rather than rising house prices. This is a positive sign for the future."
National News Committee is the official news organization of Nepal.
