WELLINGTON, Sept. 2 (Xinhua) -- New Zealand's central bank on Wednesday raised its official cash rate by 25 basis points to 2.75 percent as annual inflation rose to 4.1 percent in the June quarter, driven by higher fuel prices arising from the Middle East conflict.
The Reserve Bank of New Zealand's Monetary Policy Committee said in a statement that gradually removing monetary stimulus was appropriate to return inflation to its 2 percent target midpoint while supporting growth and employment.
New Zealand's economic recovery has most likely resumed but remains uneven after lackluster growth in the June quarter, the committee said, noting that resilient demand from trading partners and strong export prices are supporting income growth and investment in export-exposed sectors and regions of New Zealand.
In contrast, weak income growth, job insecurity and flat house prices continue to weigh on household spending and residential investment, particularly in Auckland, the country's largest city, and the capital Wellington, the statement said.
The committee expects the recovery to strengthen and broaden, with the export sector remaining resilient and household spending gradually increasing.
Conditions in the labor market should improve as the recovery gathers pace, and purchasing power will increase as inflation returns to the 2 percent target midpoint, it said, adding that future policy decisions will depend on the committee's judgement of the balance of risks to medium-term inflation.
"Unlike some previous upturns, this recovery is being driven by the export sector rather than rising house prices. That augurs well for the future," Finance Minister Nicola Willis said in a statement. ■
