The Reserve Bank of New Zealand raised interest rates by 50 basis points, to reach 5.25% from 4.75%, while expectations were for a 25 basis point hike in the bank’s meeting that took place this morning, Wednesday, April 5th, to keep interest levels at their highest levels in 14 years.

The interest statement stated that inflation is still very high and employment exceeds its maximum sustainable level, and that the bank must intervene to return inflation to the target range of 1-3%.

The committee discussed the recent local developments in the economy and that growth in the economy began to slow down after it contracted in the fourth quarter of last year, and that the indicators point to modest growth in the first quarter of this year.

Members agreed on the need to continue tightening monetary policy until inflation drops, with the emphasis that the full impact of monetary tightening has not been fully achieved yet.

The reaction of the New Zealand dollar was positive in the first reaction, given that 25 basis points were calculated previously, but the 50 points were a surprise in the markets, as it rose by about 70 points against the US dollar, and is now trading at 1.6379 levels.