Wednesday, July 25, 2007

New Zealand Raises Key Interest Rate to Record 8.25%

New Zealand's central bank raised its benchmark interest rate to a record 8.25 percent and said borrowing costs may be high enough to contain inflation, triggering a decline in the nation's currency.

The chance of a rate increase at the central bank's next review on Sept. 13 is 11 percent, according to an index calculated by Credit Suisse. New Zealand's dollar bought 80.13 U.S. cents at 12:25 p.m. in Wellington from 80.36 cents immediately before the statement. The currency this week reached 81.10 U.S. cents, the highest since it began freely trading in March 1985.

Central banks worldwide are grappling to curb inflation pressures. Bank of England's policy makers this month increased their benchmark rate to 5.75 percent. The Bank of Canada this month raised its key rate for the first time in more than a year to 4.5 percent.
Traders increased bets the Reserve Bank of Australia will raise its benchmark rate to 6.5 percent next month after a report yesterday showed consumer prices rose faster than economists expected in the second quarter.

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