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New Zealand Central Bank Lifts Rates to Limit Easing of Conditions, Rabobank Says

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New Zealand's central bank raised interest rates by 25 basis points to 2.50% at its July meeting, partly to prevent further easing in financial conditions and support the Kiwi dollar, Rabobank said Thursday.

The country's economic activity continued to gain strength through the March quarter, with growth expanding beyond agriculture into goods-producing and services sectors.

Business and consumer confidence also improved after the Middle East tensions receded. However, geopolitical risks remain high due to recent strikes and US President Trump's comment that the ceasefire is "over."

RaboResearch maintained its outlook that the Reserve Bank of New Zealand will raise the Official Cash Rate three more times by the end of first quarter next year, taking it to 3.25%. This represents a slightly faster pace of rate hikes than the market is currently expecting, the firm added.

The Monetary Policy Committee said future interest rates decisions will be guided by how price-setting behavior and excess productive capacity impact medium-term inflation pressures.

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