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New Zealand raises interest rate to 2.75 percent

Reserve Bank Governor Graeme Wheeler said Thursday the speed and extent of interest rate hikes will be determined by the bank's assessment of emerging inflationary pressures.

"New Zealand's economic expansion has considerable momentum, and growth is becoming more broad-based," he said.

"The high exchange rate remains a headwind to the tradeables sector," he said. "The bank does not believe the current level of the exchange rate is sustainable in the long run."

In its 2014 outlook, the OECD predicted New Zealand's economy will expand by 3.3 percent, more than the 2.9 percent in the U.S., 2.6 percent in neighboring Australia, and 1 percent in the euro area.

Economic surveys indicate that everyone from New Zealand business owners to consumers are more confident than they have been since before the 2008 downturn. Unemployment remains a manageable 6 percent, and some farmers in the agricultural-driven economy have never experienced such good times.

The improving economy also seems to be slowing the exodus of residents to Australia, which boasts higher living standards than New Zealand and weathered the financial crisis better than almost every other nation thanks to a mineral boom. But Australia's economy has begun slowing, just as New Zealand's takes off.

Copyright 2014 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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