Reserve Bank raises rates and signals more to come

As expected, Reserve Bank governor Alan Bollard has raised interest rates for the fifth time this year and is promising more to come is likely.

He raised the official cash rate (OCR) from 6% to 6.25%, citing the surprising strength of the economy, stretched resources and strong inflation pressures.

Nobody was surprised at the move itself, least of all Bank of New Zealand economists who were already predicting another rate rise in October and a 40% chance of yet another move in December.

BNZ economist Stephen Toplis says his bank will probably move to a formal prediction of a December rate increase after today’s statement. That would take the OCR to 6.75% which he says "won’t be too far from the top."

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