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Dr Cullen muddies the waters of monetary policy

Treasurer Bill English said today that comments by Dr Cullen on the outlook for interest rates and the operation of monetary policy demonstrated the Labour Party’s disregard for the independence of the Reserve Bank.

“For the second time in two months Dr Cullen has indicated that he considers his own judgement on monetary policy to be at least as good if not better than the
Reserve Banks.

“A Reserve Bank independent of political influence has been a key contributor to lowering inflation in New Zealand. Comments by Dr Cullen only create uncertainty around monetary policy.

"The Labour Party owes it to the public of New Zealand to lay out in detail what changes it would make to the Policy Targets Agreement (PTA).

“Labour should also outline the circumstances in which it would override the judgement of the Governor of the Reserve Bank. Even if the PTA is changed to accommodate Labour’s preferences, it is clear that Dr Cullen would find it difficult to allow the Governor of the Reserve Bank to do his job independently of political pressure.

“The outlook for the New Zealand economy is good, and we expect sound growth over the next 2 or 3 years. Against that background interest rates are likely to rise through the business cycle.

“Independent monetary policy is about allowing the Reserve Bank to determine how and when that happens,” said Mr English.


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