The Reserve Bank raised the official cash rate by 50 basis points to 3 percent, as expected, to its highest level in seven years.

Governor of the Reserve Bank Adrian Orr.Governor of the Reserve Bank of New Zealand Adrian Orr Photo: RNZ / Dom Thomas

It said borrowing costs needed to rise to bring inflation, currently at a 32 year high of 7.3 percent, back under control.

It signalled further rate rises were likely.