The Reserve Bank (RBNZ) has raised interest rates by another 50 basis points to highs not seen since the 2008 global financial crisis.
It's set the official cash rate at 5.25 percent, with the central bank's aggressive policy tightening continuing to try and tame sky-high inflation.
RBNZ had earlier expected the OCR to peak at 5.5 percent this year but the peak would now depend on the extent of the "moderation in core inflation and inflation expectations", according to its monetary policy statement.
The latest move marked the most combative OCR tightening streak since it was first introduced in the late 1990s.
"Over the medium term, the committee anticipates economic activity to be supported by rebuilding efforts in the aftermath of the weather events," the RBNZ said. "The demand on resources is expected to add to inflation pressure by more than assumed in the February monetary policy statement."
The decision was largely out of line with the market and most analysts, who had agreed on a 25bp hike.
But in the statement, the RBNZ suggested inflation was still too high and persistent.
"Inflation fighting is the name of the game, and the RBNZ is fighting this war all guns blazing still," Infometrics chief executive Brad Olsen said in a post on Twitter.
"I think a key part of today's decision is that there was virtually no market response to the 50bp increase in Feb '23... RBNZ has been talking a big talk, and has backed that up with action."
New Zealand's annual inflation was running at a close to 30-year high 7.2 percent, well above the RBNZ's target range of between 1 and 3 percent.
In the statement, the RBNZ said reducing inflation quicker now "improves the outlook for financial stability by limiting the need for even higher interest rates in future".
"Overall, the committee's assessment is that the economy is starting from a slightly weaker position than assumed in the February statement. However, demand continues to outpace supply and this continues to be reflected in persistently high domestic inflation."
Cyclone impacts 'larger than assumed'
While the rebuild from Cyclone Gabrielle and the Auckland flooding was already expected to boost the economy and inflation, the RBNZ said the impacts were likely to be bigger than first thought.
"Daily spending data show that these events resulted in a short-lived drop in household spending in affected areas, with a relatively quick bounce back to pre-event levels. At the same time, these events have resulted in an increase in some prices," the bank said.
"Over the medium-term, the inflationary impacts of these events are likely to be somewhat larger than assumed at the time of the February statement as more information has come to light about the scale of rebuild activity."
Infometrics now expects New Zealand's OCR to rise to a peak of 5.75 percent, up from the earlier 5.25 percent predictions.
