Comments from the acting leader of the Reserve Bank of New Zealand
- Persistently low inflation has prompted the RBNZ to think about whether it needs to tweak its approach to monetary policy
- It may be time for mon pol to put more weight on output, employment and financial stability rather than inflation
The bolded is a big statement. But why use interest rates to do that? In the big picture it makes sense to do something to restrain asset bubbles but that's more of a problem for macro-prudential regulators than the people on the interest rate levers.
Still, he raises a good point, because I struggle to see a future where central banks control inflation any better than they have over the past decade (which isn't very well).
More:
- RBNZ should be cautious about making any recommendations for a change in current mon pol framework
- Recently we have been assuming greater persistence in low global inflation. That assumption is contributing to our current flat track for interest rates
- RBNZ says has assumed weak global inflation will persist but there are no upside risks
That's a hawkish line and it touches on the theme of global synchronized growth (and inflation). That comments has led to some NZD buying.
Here is the full speech.
