In one of the economy’s worst kept secrets, the Reserve Bank lifted the official cash rate from its historic low of 2.5 percent, up to 2.75 percent on Thursday – and it seems high dairy prices are at least partially to blame.

Reserve Bank Governor Graeme Wheeler said at the announcement that the continued strength of international commodity prices, particularly dairy, is providing impetus to the economy at present.

Current forecasts from all major banks are picking prices to stay strong in the short term, backed by Asian demand for dairy in particular.

The Reserve Bank said in a statement that high supplementary feed stocks in particularly dry areas should help to offset any loss in pasture volumes – even if conditions worsen in the coming months.

The kiwi dollar lifted alost instantly as a result, hitting a 5 month high of US85.60c at the close of trading on Thursday.

– Country TV