New Zealand’s central bank has stepped up its fight against soaring prices, raising its key interest rate to the highest level in over 13 years.

The Reserve Bank of New Zealand (RBNZ) increased its key rate of interest by 0.75 percentage points to 4.25%.

That was the biggest rise since the rate, known as the official cash rate, was introduced in 1999.

It comes after the country’s annual inflation rate stood at 7.2% in the three months to the end of September.

Like much of the rest of the world, New Zealand has seen the cost of living rise sharply as the global economy emerges from the pandemic and the war in Ukraine has pushed up the cost of fuel and food.

During a parliamentary hearing on Wednesday, New Zealand’s Finance Minister Grant Robertson said the world economy faced a “year of reckoning” in 2023.