New Zealand's central bank on Wednesday raised its benchmark interest rate to the highest level in six years as it tries to control surging inflation that is rattling the global economy.

After the Reserve Bank of New Zealand hiked its official cash rate by a widely anticipated 50 basis points to two percent, governor Adrian Orr warned that further rises would follow.

The local dollar jumped more than half a U.S. cent after the decision, though shares in Wellington were down in afternoon trade.

The increase is the second in six weeks and comes as inflation sits at 6.9 percent, its highest level in more than 30 years.

"A larger and earlier increase... reduces the risk of inflation becoming persistent," Orr said in a statement.

"However, headwinds are strong. Heightened global economic uncertainty and higher inflation are dampening global and domestic consumer confidence."

The Reserve Bank is forecasting annual inflation to peak in the middle of this year at around 7 percent before dropping to nearly half that figure by March 2023.

(With input from AFP)