The Reserve Bank of New Zealand (RBNZ) hiked interest rates on Wednesday to a seven-year high as it aims to contain soaring inflation.

The central bank’s policy committee increased its official cash rate by 50 basis points to 3.5%, the eighth hike in 12 months.

The committee discussed a 75-basis point increase considering the price pressures within the country’s economy, Reuters reports.

“The committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment,” said central bank Governor, Adrian Orr.

“Core consumer price inflation is too high and labour resources are scarce.”

This statement was in contrast to a dovish stance by the Reserve Bank of Australia, which made a smaller-than-forecast 25-basis point hike at Tuesday’s policy meeting.

Following the move, the New Zealand Dollar rose 0.9% to $0.5782. Markets have been pricing in more than a 60% chance the central bank will increase rates by a further 50 basis points at November’s meeting, and see rates reaching a peak of 4.5% in May.

“The statement was punchy and hawkish, and highlighted the need to demand-destruct inflation back to target,” said Jarrod Kerr, Kiwibank chief economist.

“More rate rises are required for mandates to be met. We continue to forecast a peak in this cycle of 4.0%. Although the risk is clearly tilted towards even more policy tightening to 4.5%,” he added.

Inflation was already at a three-decade high of 7.3% in Q2 and is forecast to rise further, whilst unemployment was close to all-time lows of 3.3%.

“The signals on capacity and inflation pressures are most important for the RBNZ right now,” stated Miles Workman, an ANZ senior economist. “Capacity constraints easing at a snail's pace isn't enough to get core inflation back to an acceptable level in an appropriate time frame.”