The Reserve Bank of New Zealand has raised the official cash rate for the first time in three years, increasing it to 2.75 per cent due to pressure on inflation.
The widely expected 25-basis point rise was announced by bank governor Graeme Wheeler on Thursday morning.
Mr Wheeler says that while New Zealand's economic expansion has considerable momentum and growth is becoming more broad-based, inflationary pressures are increasing and are expected to continue to increase in the next two years.
"In this environment it is important that inflation expectations remain contained. To achieve this it is necessary to raise interest rates towards a level at which they are no longer adding to demand," he said.
The rise will see mortgage lending rates increase but people will also get more interest on their savings.
