The Reserve Bank of New Zealand raised its official cash rate by 25 basis points to 2.75 percent on Wednesday. The move matched market expectations and marked another step in the bank's effort to keep inflation under control while supporting economic growth. The central bank said inflation risks remain a concern despite signs that New Zealand's economy is recovering. Policymakers agreed that gradually removing monetary stimulus is the right approach to return inflation to the bank's target while avoiding unnecessary pressure on jobs and the wider economy. The latest increase follows another rate hike in July and reflects the bank's continued focus on price stability. Officials said annual inflation reached 4.1 percent in the June quarter, mainly because higher fuel prices linked to the Middle East conflict pushed up costs across the economy. The Reserve Bank said core inflation, wage growth, and inflation expectations remain consistent with inflation returning to the target range over time. It expects inflation to move back within the 1 to 3 percent target band by mid-2027 and reach the 2 percent midpoint later next year if economic conditions develop as expected. Officials said the country's economic recovery has likely resumed after weak growth during the June quarter. Strong demand from trading partners, better export prices, and investment in export-focused industries are helping the economy improve. However, household spending remains under pressure because income growth is still weak, job uncertainty continues, and housing prices have stayed mostly flat. The Monetary Policy Committee said raising the cash rate now reduces the risk of needing larger interest rate increases later. The committee believes the current policy setting will help prevent temporary inflation shocks from becoming long-term price increases across the economy. The committee also warned that future interest rate decisions are not fixed. It said upcoming economic data will guide the next moves and that policymakers will continue to assess the balance of risks to medium-term inflation before making further changes. Financial markets had widely expected the quarter-point increase before the policy announcement. Investors are now watching for signals on whether the Reserve Bank will raise rates again later this year if inflation remains above target. The interest rate decision also affected financial markets. The New Zealand dollar weakened after the announcement as investors viewed the central bank's guidance as less aggressive than some had expected. Analysts said traders are now focused on future policy signals rather than the rate increase itself. The official cash rate is the Reserve Bank's main tool for influencing borrowing costs across New Zealand. Changes to the rate affect mortgage costs, savings returns, business loans, and overall spending in the economy. The Reserve Bank said it remains committed to returning inflation to its target while supporting sustainable economic growth and employment. Future policy decisions will depend on inflation, wage growth, economic activity, and global developments that could affect prices in New Zealand.