New Zealand's central bank raised its key interest rate by a quarter percentage point on Thursday, but said the pace of future hikes is likely to be more moderate than first thought amid a fragile global economy.
The increase in the official cash rate to 3 percent followed a quarter point rise on June 10 that lifted the rate from its record low of 2.5 percent, where it was held for 13 months to counter the worldwide recession.
"While the outlook for economic growth has softened somewhat, it is still appropriate to continue to reduce the extraordinary level of support implemented during the ... recession," Reserve Bank governor Allan Bollard said.
"The world economy continues its fragile recovery. Trading partner growth has turned out stronger than we predicted, however future prospects for growth have deteriorated. While still at high levels, our commodity prices have moderated."
Bollard said New Zealand's inflation rate had been near 2 percent for the past five quarters but as the economy grew, inflationary pressures would increase.
"Given this, some further removal of monetary policy stimulus is appropriate at this stage," he said. "Our policy assessment will be continually reviewed in light of economic and financial market developments."
