Bank of New Zealand Lifts 3-Year Freeze on Interest Rate by 0.25% to 2.75%

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By Vittorio Hernandez | March 13, 2014 3:52 PM EST

Reuters
The remains of a building can be seen on a closed and deserted street in the former central business district of the New Zealand city of Christchurch

YouTube/fx teknikal

The Reserve Bank of New Zealand raised on Thursday the official cash rate (OCR) by 0.25 basis points to 2.275 per cent. It ended the three-year freeze on interest rates imposed by the national government after the Christchurch earthquake.

Reserve Bank Governor Graeme Wheeler said, "By increasing the OCR as needed to keep future average inflation hear the 2,0 per cent target midpoint, the bank is seeking to ensure that the economic expansion can be sustained."

He hinted that there would be rate hikes in the future to curb inflation.

"The speed and extent to which the OCR will be raised will depend on economic data and our continuing assessment of emerging inflationary pressures," Mr Wheeler added.

With this development, New Zealand becomes the first developed country in 2014 to leave record-low lending rates.

Mr Wheeler said the central bank also plans to remove stimulus faster than previously forecast in a bid to contain prices. He added that it is necessary to increase interest rates toward a level that they no longer add to demand.

He said the central bank expects to further raise the rates by 2 percentage points more over two years.

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The remains of a building can be seen on a closed and deserted street in the former central business district of the New Zealand city of Christchurch
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