Bollard lifts OCR to 2.75%

"New Zealand's export commodity prices have increased sharply over the past few months, boosting export incomes," Bollard said in a statement in Wellington today. The recovery in Asia, Australia and the US "has so far offset weak growth in some other export markets."

A surge in dairy prices underpinned the export-led recovery favoured by the central bank, as milk prices more than doubled from a trough in July last year. New Zealand posted its first annual trade surplus since 2002 with the $161 million excess of exports over imports in the 12 months through April, helped by demand from Australia and China.

The rate hike comes after Bollard kept the OCR at a record low 2.5% for 13 months in response to New Zealand's worst recession in 18 years amid a credit crunch that saw international finance lines dry up, sapping lenders' ability to fund businesses and households alike.

Still, he was more opaque about future rate hikes, saying that although the current outlook and previous signalling dictated today's increase, "further removal of stimulus will be reviewed in light of economic and financial market developments."