WELLINGTON, May 1 (Reuters) - New Zealand's central bank said on Wednesday the country's financial system remains strong as it continues to adjust to the higher interest rate environment.
"New Zealand's financial system remains well placed to handle a range of severe scenarios," the Reserve Bank of New Zealand (RBNZ) said in a statement released with its financial stability report, which is released twice a year.
It added that while global inflation is declining, there remains a risk that new or persistent inflation pressures could mean global interest rates remain restrictive for longer, placing continued pressure on households, businesses and the financial system.
New Zealand's official cash rate is at a 15-year high and inflation is currently at 4.0%, which is putting pressure on households and businesses across the country.
The RBNZ this month kept its cash rate unchanged at 5.5% for the sixth consecutive meeting and reiterated that restrictive monetary policy was necessary to further reduce capacity pressure and bring down inflation.
The financial stability report said while market pricing currently implies advanced economies will begin to reduce interest rates later this year, central bank communications have emphasised uncertainty about the outlook.
The report said most New Zealand mortgage borrowers have now repriced onto higher interest rates and that some are doing it tough and reducing their spending and extending their repayment timelines. Some households face heightened job uncertainty, it added. (Reporting by Lucy Craymer; Editing by Chris Reese and Jamie Freed)
