In a speech to the Otago Chamber of Commerce this morning, Mr Wheeler said the challenges for central banks have stretched well beyond what was envisaged when policy frameworks and inflation targets were first set.
Advertisement
Robertson has been arguing that, despite annual economic growth rates at around 3 percent and low unemployment by global standards, the August 11 cut in the official cash rate to 2 percent was a “vote of no confidence” in the New Zealand economy.
“The results of this survey provide useful policy information”, the central bank said in a statement.
The New Zealand dollar has risen ahead of a speech by Reserve Bank governor Graeme Wheeler which may hint at the timing of further easing, with at least one further cut expected this year.
The Reserve Bank governor has hit back at critics questioning whether the ongoing, super-low inflation means the country needs to look at new ways to control monetary policy.
Alternatively, they may have been expecting “something about implied higher odds for a cut in November”, said Zollner.
“It would use up much of the bank’s capacity to respond to the likely boom/bust situation that would follow and would place the Reserve Bank in a situation similar to many other central banks of having limited room to respond to future economic or financial shocks”. RBI announces monetary policy review every two months and next is scheduled on October 4.
The OCR is already at a record low of 2.00% after a cut this month.
However, Wheeler also countered the view that a more aggressive response to weak inflation was needed.
“Low headline inflation increases the risk that inflation expectations might fall and become embedded in wage and price-setting outcomes that become self-perpetuating and drive headline inflation lower”.
Wheeler mounted a defense of inflation targeting, which the RBNZ pioneered in the early 1990s, saying it remains the most appropriate framework for conducting monetary policy in New Zealand.
Inflation is a key factor which the central bank factors in monetary policy.
Advertisement
Before it’s here, it’s on the Bloomberg Terminal.
