“Core consumer price inflation is too high, employment is beyond its maximum sustainable level, and near-term inflation expectations have risen,” the bank said in a statement.
“The productive capacity of the economy is being constrained by broad-based labour shortages, and wage pressures are evident. Aggregate demand continues to outstrip New Zealand’s capacity to supply goods and services, with a range of indicators continuing to signify broad-based inflation pressure,” it said.
Minutes from a bank meeting showed it had even considered a full percentage point hike, a newswire reported.
"Inflation is no one's friend and in order to rid the country of inflation we need to reduce spending levels," RBNZ governor Adrian Orr told reporters. "That means that we will have a period of negative GDP growth."
The bank’s monetary policy committee members agreed that monetary conditions needed to continue to tighten further, so as to be confident there is sufficient restraint on spending to bring inflation back within its 1-3 percent per annum target range.
ALCHEMPro News Desk (DS)
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