The Reserve Bank of New Zealand (RBNZ), the central bank of the country, has reportedly raised interest rates for the first time in seven years, increasing its cash rate from 0.25% to 0.5% to control inflation and property prices.
According to reports, the last time the central bank spiked interest rates was when it raised the cost of borrowing during its interest rate setting meeting held in July 2014.
Evidently, New Zealand is one of the first developed countries to implement the reversal of rate cuts that were levied during the pandemic. The country had seemingly cut its main interest rate to a record low of 0.25% in March 2020 in order to help the economy cope with the effects of the pandemic.
According to reliable sources, economists speculated the rise in interest rates to take place last month, but the bank postponed it owing to the COVID-19 Delta variant outbreak.
The RBNZ stated its plans to further withdraw the additional monetary policy stimulus over time as the economy recovers. Future decisions would be dependent on the medium-term outlook for employment and inflation, RBNZ added.
New Zealand has quickly recuperated from the recession in 2020, due in part because it was able to contain the virus and reopen its economy far ahead of other countries, reports claim.
As per reports, following the COVID-19 outbreak last year, governments, international financial institutions, and central banks cut interest rates and injected trillions of dollars into the global economy to shield it from the repercussions of countries going into lockdowns and closing borders.
The interest rate hike has put New Zealand among the first few developed economies that have increased borrowing costs in recent weeks as central banks aim to reverse emergency measures, reports indicate.
Apparently, South Korea, the Czech Republic, and Norway have also raised borrowing costs for the first time since the onset of the coronavirus pandemic, with several other countries expected to follow suit. Notably, businesses and individuals would inevitably bear the brunt of these rising borrowing prices.
Source credit: https://www.bbc.com/news/business-58812068