Investing.com - The Reserve Bank of New Zealand Thursday raised the official cash rate by 25 basis points to 2.75% in a widely expected decision that still gave the currency a jolt upwards.
NZD/USD traded at 0.8439, up 0.58%, after the rate hike announcement and remained well bid as economic forecast by the central bank pointed to higher 90-day bill rates, though there was a warning the track of the currency was not sustainable.
"By increasing the OCR as needed to keep future average inflation near the 2% target mid-point, the Bank is seeking to ensure that the economic expansion can be sustained," Governor Graeme Wheeler said in a statement.
The RBNZ has also increased by 20 basis points its projected track for the 90-day bank bill, starting from the next quarter. The current forecast is for 3.3% in the June quarter, rising to 4.8% by December 2015. The last forecasts were for 3.1% in the June quarter, rising to 4.6%.
It also raised its GDP growth estimate for the current year to September compared to the last monetary policy statement, three months ago, to 3.4% from 2.9%.
As a result, the RBNZ also revised its exchange rate track upwards with the trade-weighted index is now forecast to stay above 75.5 through to the end of 2016, instead of previous expectations it would fall back towards the 70 mark.
But Wheeler said the high exchange rate "is not sustainable in the long run."
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