The Reserve Bank of New Zealand raised interest rates aggressively on Wednesday in response to stubborn inflation pressures, ignoring recent signals from some its global peers that the pace of policy tightening could slow. The RBNZ raised its official cash rate by 75 basis points to 4.25%, taking the pace of increases a step up from the 50-basis-point hike that took the rate to a seven-year high of 3.50% in early October.
The big surprise in the statement lay in the RBNZ’s projected path for the OCR, which it now expects will need to reach a peak of 5.5% next year compared to the peak of 4.1% forecast in August. “The committee agreed that the OCR needs to reach a higher level, and sooner than previously indicated, to ensure inflation returns to within its target range over the medium term,” RBNZ Gov. Adrian Orr said in a statement. “Core consumer price inflation is too high, employment is beyond its maximum sustainable level, and near-term inflation expectations have risen,” he added. The RBNZ also noted that it had considered delivering a 100-basis-point hike on Wednesday and is now forecasting a recession next year. It expects gross domestic product to f …