High dairy prices are one of the factors behind the Reserve Bank's decision to lift the Official Cash Rate.
As expected, the central bank on Thursday raised the benchmark interest rate from 2.5 percent to 2.75 percent, the first increase in three years.
The central bank says the country's economic expansion has considerable momentum, and along with construction, the growth is being led by the strong prices and demand for the country's commodities, particularly dairy products.
It says that for dairy products in particular, global supply is expected to continue to increase over the coming years, while demand from Asia is expected to remain strong.
The Reserve Bank says following last summer's drought, milk production has been strong in the 2013/14 season, and high supplementary feed stocks should provide some support for milk production if dry conditions in the North Island deteriorate further over the remainder of the season.
