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KEY POINTS:
Finance Minister Michael Cullen has welcomed Reserve Bank Governor Alan Bollard's statement that today's cash rate rise is likely to be the last for some time.
Despite pleas from exporters and some MPs for Dr Bollard to hold the official cash rate (OCR) he lifted it today to 8.25 per cent - the fourth rise in as many months.
But today's main message was Dr Bollard's comment that people were showing early signs of moderating their borrowing and the four rises should be enough to contain inflation.
Dr Cullen said that key signal was "pleasing".
Rate rises were putting pressure on homeowners who had mortgages coming up for renewal and a halt in cash rate would provide some relief.
"That would be very good news if that was the case."
He said the small fall in the dollar on the back of Dr Bollard's statement was good news for exporters.
National Party finance spokesman Bill English blamed increased Government spending for the inflation forcing up interest rates.
Mr English said the Government was "sacrificing home owners and exporters in the cause of Labour's big-spending re-election campaign".
But Dr Cullen said it was capacity constraints in the long strong economy behind inflation rather than Government spending.
The Government was doing its bit to keep inflation down by removing money from the economy through its $2 billion a year super fund.
KiwiSaver was also an initiative that would take demand out of the economy, he said.
United Future leader Peter Dunne said he deeply regretted the latest rise.
He said the high OCR was behind the currency's record level, which was hammering exporters.
"There seems little point to the whole exercise if the price of controlling inflation is the death of the productive economy."
However he said the market had already factored the rise in meaning it would have little impact on the dollar.
New Zealand First MP Doug Woolerton said today's hike highlighted deficiencies in the Reserve Bank Act, which NZ First is attempting to revise.
It reflected the flawed logic of relying on just interest rates to control monetary policy, he said.
Green Party co-leader Russel Norman highlighted Dr Bollard's emphasis on the role of soaring oil prices in inflation.
He said that was a sign of things to come and New Zealand should be doing all it could to reduce its reliance on oil.
"If we want to reduce our interest rates we need to reduce our oil dependence which means prioritising investment in public transport now, not more and more new motorways."
- NZPA
