The central bank now sees the OCR peaking at 4.1 per cent as it fights inflation pressure. Previously, it had forecast a peak of 3.95 per cent.
Monetary Policy Committee members agreed that monetary conditions needed to continue to tighten until they are confident there is sufficient restraint on spending to bring inflation back within its 1-3 per cent per annum target range.
The New Zealand dollar rallied to US63.46c from US63.36 before the announcement. Wholesale interest rates remained steady, the two year swap trading at 3.93 per cent.
Global consumer price inflation had continued to rise, albeit with some recent reprieve from lower global oil prices, the Committee said.
"The war in Ukraine continues to underpin high commodity prices, with global production costs and constraints further exacerbated by supply-chain bottlenecks due to the ongoing Covid-19 health challenge."
Meanwhile, the outlook for global growth continued to weaken, reflecting the ongoing tightening in global monetary conditions.
Domestic spending had remained resilient to global and local headwinds to date.
"Spending levels are supported by a robust employment level, continued fiscal support, an elevated terms of trade, and sound household balance sheets in aggregate," the Committee said.
However, production was being constrained by acute labour shortages, heightened by seasonal and Covid-19-related illnesses. In these circumstances, spending and investment continues to outstrip supply capacity, and wage pressures are heightened. A range of indicators highlight broad-based domestic pricing pressures.
The RBNZ warned that domestic inflationary pressure was still high and underlying inflation was still rising. It expected to see inflation back in its target range of 1-3 per cent by mid-2024.
The 50-basis-point hike to the OCR was considered a near certainty by economists.
"That's been a settled matter for some time," Westpac chief economist Michael Gordon says.
"Even if the Reserve Bank hadn't repeated its wording around tightening monetary conditions 'at pace' in its July review, the need for a continued strong response to inflation has been all too apparent."
Consumer Price Index inflation is sitting at 7.3 per cent - well outside the RBNZ target of 1-3 per cent.
