New Zealand raised interest rates for the first time in 7 years, in line with market expectation

RBNZ raised the interest rates by 25 basis points on Wednesday. The official cash rate is now 0.50%. The increase marked the start of a tightening cycle. However, the market had been expecting the decision since August. The delay was primarily due to the Delta outbreak which led to a lockdown in Auckland. NZDUSD dropped slightly to 0.6940, as investors have already fully priced in the interest rate hike.

The decision has put New Zealand ahead of other developed countries. As the world economy starts to recover, central banks have also started to wind back emergency support. Some countries such as Norway and South Korea have already taken the action to raise their interest rates. However, not far from New Zealand, the central bank in Australia has decided to keep the rate steady at 0.1% on Tuesday.