Daily Times

The Reserve Bank of New Zealand stayed true to its course of the past 18 months, unveiling another 50 basis point increase in its key rate to 3.5 percent – a level not seen since May 2015 – and warned of more rises in a bid to stymie price rises.

The move came as its counterparts in the United States, Europe and elsewhere ramp up rates to curtail decades-high inflation, fuelling concerns they could trigger a prolonged global downturn.

The central bank warned inflation could climb beyond the current 7.3 percent rate, which is already a 32-year high.

The announcement came on the same day New Zealand’s government unveiled a better financial position than expected in its accounts to the end of June.

A rise in tax revenue and slower growth in spending resulted in a deficit of NZ$9.7 billion (US$5.6 billion), considerably less than the forecast deficit of NZ$19 billion.

The island nation of 5 million is desperately short of workers with migration flows yet to recover after a long pandemic shutdown.

Meanwhile, Asian and European stocks rallied Tuesday and the dollar dipped as weak US data sparked hopes the Federal Reserve could ease its interest-rate hiking plans. Frankfurt and Paris equities soared more than three percent in value after similar stellar gains in Tokyo, while London won two percent. “Weaker-than-expected manufacturing data from the US was taken as a signal that rising interest rates may be having some effect on cooling demand for goods,” said Interactive Investor analyst Richard Hunter.”This in turn led to hopes of a Federal Reserve pivot, even though the spectre of inflation remains firmly at the top of their stated to-do list.”