RBNZ governor says the bank's policy to be contractionary

The head of the Reserve Bank of New Zealand (RBNZ) said Thursday that interest rates must be raised in order to curb inflation. In this regard, the country may enter recession. 

New Zealand Central Bank Governor Adrian Orr regretted the negative impact of inflation on the country's population. Thus, overcoming the bank's inflation target of 2% led to higher economic costs. 

Earlier, the RBNZ raised its official cash rate to 4.25 %. This was a 75-basis-point hike, being a record level for the country. New Zealand is projected to face a one-year recession in 2023 as rates continue to climb.

The central bank is going to keep on monetary tightening. Interest rates in the country are expected to hit 5.5%. This will exceed market forecasts of 4.1%.

Adrian Orr noted that the RBNZ plans to limit economic growth, risking to go beyond existing funds. Therefore, the bank is set to pursue a contractionary monetary policy.