Scoop has an Ethical Paywall
Work smarter with a Pro licence Learn More

Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 

RBNZ Must Act Against Inflation Expectations


Reserve Bank Must Act Against Inflation Expectations

"The test of the new Policy Targets Agreement will be the practical decisions of the Reserve Bank under it", Roger Kerr, executive director of the New Zealand Business Roundtable, said today.

"Already inflation has been running at over 2.5 percent on average in the last three years, and inflation expectations have crept up.

"Higher inflation would increase interest rates and do nothing for economic growth.

"It is hard to see the advantages of a narrower 1-3 percent band, and there is a risk that it will be interpreted as foreshadowing an easier monetary policy. If annual inflation were to average 2 percent, the mid-point of the band, the Consumer Price Index would increase by around 22 percent in a decade, an outcome hardly consistent with price stability.

"As the new governor of the Reserve Bank, Dr Bollard will have to act firmly to ensure that the hard-won credibility of the Bank's commitment to price stability is not thrown away. This is the third modification to the PTA in the six years of MMP, which must be of concern to investors looking for stable policy settings in New Zealand.

"For its part, the government needs to match its goals for better economic growth with credible pro-growth policies, such as fiscal discipline and increased flexibility in the economy, which will also facilitate the Reserve Bank's task", Mr Kerr concluded.

ENDS

Advertisement - scroll to continue reading

Are you getting our free newsletter?

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.

© Scoop Media

Advertisement - scroll to continue reading
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

 
 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels


 
 
 
 

Join Our Free Newsletter

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.