Surprise rate rise in New Zealand

The rise sent the New Zealand dollar to a 22-year high

New Zealand's central bank has unexpectedly raised interest rates from 7.75% to 8%, the highest rate among industrialised nations.

The news sent the New Zealand dollar up to its highest level against the US dollar since it abandoned the peg to a basket of currencies in 1985.

The Reserve Bank of New Zealand was expected to keep rates on hold after raising them at the last two meetings.

Rate-setters were worried about consumer demand fuelling inflation.

"They're doing what they've to got to do. There's an urgency to slow the economy down and they're starting to wake up to that," said Craig Ebert, senior economist at Bank of New Zealand.

Retail sales rose at a record pace in the first three months of the year as spending on cars and appliances grew.

An expected increase of 27% in dairy farmers' income next season was also cited as a significant factor in raising rates.