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New Zealand hikes interest rates to 3.25 percent

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June 11, 2014 05:34 PM EST | AP


WELLINGTON, New Zealand (AP) — New Zealand on Thursday raised its benchmark interest rate for the third time this year to 3.25 percent.

The country's Reserve Bank said the economy has "considerable momentum" and is growing at about a 4 percent annual clip.

New Zealand is among the first industrialized nations to begin raising rates since the 2008 global financial crisis. Its economy has benefited from strong demand in China for its milk exports and rebuilding efforts in the city of Christchurch following a 2011 earthquake.

However, the rate hikes have put upward pressure on the New Zealand dollar as global investors have sought better returns on their money. That, in turn, has hurt exporters.

The Reserve Bank forecasts the economy's growth rate will ease over the coming year.

Reserve Bank Governor Graeme Wheeler said dairy prices have fallen by 26 percent since February from historic highs, meaning lower incomes for farmers.

Wheeler said house price inflation, which has been a big concern of the bank, has moderated in recent weeks.

Overall inflation is running at about 1.7 percent, with the Reserve Bank predicting it will rise to about 2 percent next year.