(Bloomberg) -- New Zealand unemployment unexpectedly rose from a record low in the second quarter but wages rose at the fastest pace in 14 years, suggesting the central bank may need to keep raising interest rates aggressively to tame inflation.

The jobless rate climbed to 3.3% from 3.2% in the first quarter, which was the lowest level since records began in 1986, Statistics New Zealand said Wednesday in Wellington. Economists expected a decline to 3.1%. Employment was unchanged from the previous three months, while annual wage inflation accelerated to 3.4%, the fastest since 2008.

Labor shortages and capacity constraints are contributing to soaring inflation in New Zealand, prompting the Reserve Bank to rapidly remove monetary stimulus. The RBNZ is tipped to undertake a fourth consecutive half-percentage rate hike later this month, taking the Official Cash Rate to 3%, as it seeks to curb demand in the economy.

The kiwi dollar fell after the employment report. It bought 62.34 U.S. cents at 10:52 a.m. in Wellington, down from 62.55 cents beforehand.

While the RBNZ doesn’t have a numerical goal for employment growth or the jobless rate, it has said employment is above the maximum sustainable level it is required to achieve. At 7.3% in the second quarter, inflation is also well in excess of the 1-3% band the central bank targets.

The RBNZ’s policy tightening has driven down property prices and eroded business and consumer confidence, raising the possibility of a recession. But the labor market remains tight because of an absence of migrant workers. The border only fully reopened this week, more than two years after it was closed at the outset of the pandemic.

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Author: Tracy Withers