The Reserve Bank of New Zealand's (RBNZ) fight against inflation continued by raising interest rates by 75 basis points at its policy meeting on Wednesday (November 23).
This has made the official cash rate (OCR) rise to 4.25%, the highest since January 2009.
More increases are expected in the coming meetings, with the market predicting the OCR to peak at 5.5% in the third quarter of 2023.
The RBNZ said the OCR would need to reach higher and faster levels than previously estimated to return inflation to its target range in the medium term.
The central bank remains more hawkish than its regional counterpart in Australia, which has slowed its rate hikes in recent months.
In fact, during the policy discussions that took place today, policy makers considered raising rates by 100 basis points.
It's in response to soaring inflation and low unemployment that supports the case for them to continue aggressive tightening.
Although hawkish, the RBNZ predicts the economy will contract for four consecutive quarters starting from the second quarter of next year.
The impact is in line with the central bank's aggressive measures, which see annual inflation slowing to 5% by the end of 2023.
Following this decision, the New Zealand dollar surged higher against the US dollar on expectations that the RBNZ will continue to be hawkish in implementing tightening.
