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New Zealand Central Bank Raises Official Cash Rate to 2.75%

Since we talked about interest rates in class today, I find it appropriate to share this piece of news with the class. New Zealand on Thursday became one of the first developed nations to raise interest rates as Western economies slowly emerge from the global financial crisis.

“It is necessary to raise interest rates toward a level at which they are no longer adding to demand,” Reserve Bank of New Zealand Governor Graeme Wheeler said in a statement in Wellington after increasing the official cash rate by a quarter percentage point to 2.75 percent. “The bank does not believe the current level of the exchange rate is sustainable in the long run,” he added, reiterating that the currency’s strength is a “headwind” for exporters and local manufacturers who compete against imports.

The Reserve Bank of New Zealand is mandated with keeping annual inflation between 1% and 3%, with a 2% target midpoint. “New Zealand’s economy is at the beginning of a boom and interest rates should be increased from their current low levels to keep inflation contained,” Paul Bloxham, chief Australia economist at HSBC Holdings Plc in Sydney, said in a note for clients ahead of today’s statement.

More at:


Wall Street Journal


  1. peaseley peaseley

    After doing a little reaseach it seems that New Zealand’s financial system was relatively resistant to the global finacial crisis. I wonder what the United States and the world’s other large economies could learn from thier policy.


  2. gjeong gjeong

    Well… is it the time to raise the interest rate now? The Fed is still not sure about it. In fact, they still cannot predict the consequences of raising it. Perhaps the Fed (and other countries) can wait until what happens to the economy in New Zealand.

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