A day after Australia's central bank held rates steady at 3.6% the central bank made its 11th consecutive OCR rise.
The rise was above the expectations of most banks, which foresaw a smaller 25 basis point rise.
Governor Adrian Orr today cited the effects of Cyclone Gabrielle in February and Auckland flooding a month earlier as a reason for Wednesday's latest rise.
Inflation was still too high and persistent, and employment was beyond its maximum sustainable level.
"Demand continues to significantly outpace the economy's supply capacity, thereby maintaining pressure on annual inflation," Orr said.
"The recent severe weather events in the North Island have led to higher prices for some goods and services.
"This higher near-term CPI inflation increases the risk that inflation expectations persist above our target range."
New Zealand's consumers price index (CPI) index was last measured at 7.2% in the December 2022 quarter, well above the RBNZ's target band of 1-3%.
The OCR is now at its highest level since 2008, during the global financial crisis.
The RBNZ effectively shrugged off global banking woes.
“The Committee’s assessment is that there is no material conflict between lowering inflation and maintaining financial stability in New Zealand,” it said.
“However, wholesale interest rates have fallen significantly since the February Statement, and this could put downward pressure on lending rates.
“As a result, a 50 basis point increase in the OCR was seen as helping to maintain the current lending rates faced by businesses and households, while also supporting an increase in retail deposit rates.”
In other words, the RBNZ appears concerned that a smaller increase may have resulted in mortgage rates falling.
“Members agreed that the sooner supply and demand were better matched in the economy, the lower the overall cost of reducing inflation.”
Today’s decision is a briefer Monetary Policy Review, as opposed to a full Monetary Policy Statement. That means the central bank and Orr will likely give less away in terms of the overall economic outlook.
Yesterday, the Reserve Bank of Australia paused interest rate hikes, leaving its official cash rate at 3.6 per cent.
That decision followed consecutive interest rate rises across the Tasman since May last year.
'More pain' for Kiwis
“Mortgage-holders up and down the country were holding their breath and hoping for some relief. Instead, they’ve been given another punch in the guts," finance spokeswoman Nicola Willis said after the announcement.
“This is the eleventh consecutive hike in the Official Cash Rate. Around half of New Zealand mortgage holders will be re-fixing their mortgages in the next six months, meaning many will see their interest rates double from 3 per cent or less to more than 6 per cent.
“The speed of this hike will leave many scrambling, trying to find hundreds of dollars more every fortnight just to stand still. Some will be unable to do that.
“Sadly, for too many Kiwis this will be the punch that sends them off the edge, into mortgage arrears, unwanted house sales and financial distress."
Willis said the Labour Government's "big-spending, big-taxing, anti-business approach to the economy has failed, forcing the Reserve Bank to lift interest rates, and everyday New Zealanders are paying the price."
- AAP, NZ Herald and ODT Online
