Reserve Bank continues pace of interest rate hikes with another 50 basis point move

The Reserve Bank (RBNZ) has lifted interest rates by a widely expected 50 basis points.

In a statement on Wednesday, following its October monetary policy review, the RBNZ said it had raised the official cash rate to 3.5 percent - the eighth consecutive hike which has included five moves of 50 basis points.

The bank had flagged an ongoing tightening of monetary policy as inflation continued to ride high.

"Inflation is currently too high and employment is beyond its maximum sustainable level," the RBNZ said in a statement. "The committee agreed to continue increasing the official cash rate (OCR) at pace to maintain price stability and support maximum sustainable employment.

"The committee considered whether to increase the OCR by 50 or 75 basis points at this meeting. Some members highlighted that a larger increase in the OCR now would reduce the likelihood of a higher peak in the OCR being required.

"Other members emphasised the degree of policy tightening delivered to date... On balance, the committee agreed that a 50 basis point increase was appropriate at this meeting," the statement added.

Aggressive moves have been made by the RBNZ to curb local inflation, which was 7.3 percent in the second quarter of this year. The OCR is more than 10 times what it was this time last year.

That 7.3 percent inflation figure exceeded the RBNZ's peak forecast of 7 percent and was well above its target of between 1 and 3 percent.

"The RBNZ evidently remains of the view that its 'least-regrets' path is to get the OCR up to the peak (whatever that may be) as soon as possible, rather than risk dragging out the tightening cycle and needing to eventually lift the OCR to an even higher level," said ASB chief economist Nick Tuffley.

"We continue to expect a 50bp increase in November, followed by a 25bp lift in February to 4.25 percent."

Other central banks in Asia-Pacific have also chosen to continue their hiking cycles.

In Australia, its central bank raised the country's cash rate by 25 basis points to 2.6 percent on Tuesday and was expected to continue its rate-hike cycle amid soaring inflation. Economists were also anticipating further monetary policy tightening In Singapore, where the benchmark interest rate stood at 2.34 percent.

Economists at ANZ believed the OCR would peak at 4.75 percent in the middle of next year.