The Reserve Bank has today hiked the official cash rate by 0.25 per cent to 0.75 per cent.
Last month the official cash rate was lifted from a record low 0.25 per cent.
That 25-basis-point hike was the first for the RBNZ in seven years.
The Monetary Policy Committee noted that "further removal of monetary policy stimulus is expected over time given the medium term outlook for inflation and employment".
Some economists saw an outside chance of a double hike (50 bp) but the news today was largely in line with expectations.
The New Zealand dollar dropped in volatile trading in the minutes following the release.
By 2.05pm the currency was at US69.30c, down from US69.50c just before the 2pm announcement.
The two-year swap rate - which has an influence on fixed rate mortgage rates - dropped by five basis points to 2.32 per cent.
The tone of the RBNZ policy assessment was dovish compared to market pricing, and highlighted the various risks and uncertainties surrounding the economic outlook, said ASB chief economist Nick Tuffley.
"The policy path was consistent with the 'considered steps' mantra, with a gradual path of 25bp hikes in the profile and the OCR peaking at 2.6 per cent in late 2023," he said.
"This was higher than signalled back in August and in line with what we expected, but weaker than suggested by market pricing".
The big driver for the hikes has been high consumer price index (CPI) inflation which reached 4.9 per cent in the September quarter.
Headline CPI inflation was expected to measure above 5 per cent in the near term before returning towards the 2 per cent midpoint over the next two years, the Committee said.
"The near-term rise in inflation is accentuated by higher oil prices, rising transport costs and the impact of supply shortfalls. These immediate relative price shocks risk generating more generalised price rises given the current domestic capacity constraints."
The recent lockdown with prolonged restrictions in Auckland, Northland and the Waikato, and continued level 2 restrictions elsewhere, had resulted in a sharp contraction in economic activity, the Committee said.
But despite these lockdowns, "underlying economic strength remains supported by aggregate household and business balance sheet strength, fiscal policy support, and strong export returns".
Capacity pressures had continued to tighten.
"For example, employment is now above its maximum sustainable level."
A broad range of economic indicators highlighted that the New Zealand economy continued to perform "above its current potential".