Business

　　The central bank of New Zealand lifted its prime interest rate by a quarter of a percentage point to 5.5 percent yesterday, and signaled that another increase is possible as it moves to dampen domestic inflation.

　　Reserve Bank Governor Alan Bollard said New Zealand's economy continues to perform strongly and that a further rise would depend partly on whether the New Zealand dollar's recent fall is sustained.

　　In the past few weeks, the local currency has fallen more than 10 percent from a seven-year high of 71 US cents to 1 New Zealand dollar.

　　It is the second time this year the bank has raised the official cash rate. "Domestic inflation pressures remain strong and annual CPI (Consumer Price Index) inflation looks set to rise over the year ahead," Bollard said in a statement.

　　"Moving interest rates to less stimulatory levels appears prudent to ensure inflation remains within the target range over the medium term," he said.

　　Bollard, who last raised the benchmark rate a quarter point in January, last month forecast consumer prices may rise 2.5 percent in the year to March 2005 and 2.8 percent the next year.

　　He is required by the government to keep annual inflation between 1 percent and 3 percent. Currently it is at 1.5 percent.

　　Bollard said there are "uncertainties" around the economy, and "a further adjustment to monetary policy cannot yet be ruled out."

　　The New Zealand dollar reacted almost immediately, rising 21 points to 62.4 US cents to NZ$1 within an hour of the announcement.

　　"The rate is still on the stimulatory side," said Craig Ebert, treasury economist at Bank of New Zealand Ltd in Wellington. "There is a very good chance of a follow up move in June."

　　(AP/Bloomberg)