RBNZ concedes it’s pushed inflation above government’s target range

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Statement by Adrian Orr

A report released today, How Central Bank Mistakes after 2019 led to Inflationhas been received by the Reserve Bank of New Zealand – Te Pūtea Matua and will be considered as part of our public Monetary Policy Remit review process underway. 
 
As Governor of the Reserve Bank and Chair of the Monetary Policy Committee, I acknowledge that consumer price inflation is at 7.3 percent, above the Remit target range of 1-3 percent. I also acknowledge that the Monetary Policy Committee’s decisions over recent years have influenced this outcome. This acknowledgment is reflected in our regular Monetary Policy Statements and through our ongoing efforts to quell excess demand in the economy.
 
Inflation is no one’s friend and causes economic cost.
 
The Reserve Bank is in the midst of its first ever 5-yearly review of its Monetary Policy Remit. This Remit broadly outlines how the Reserve Bank is to conduct monetary policy and the factors it has to have regard to – see Remit. Any recommendations arising from the review will be delivered to the Minister of Finance for consideration. We have encouraged public participation in the Remit review process and sought independent international expert advice.  
 
In addition to the Remit review, we are also reviewing our recent performance in conducting monetary policy, including the use of additional monetary policy tools.  
 
This monetary policy review will assess inflation and employment outcomes relative to the targets outlined in the Remit, and the decisions taken at various times based on the information available at the time, relative to other central banks, and relative to likely alternative economic outcomes if these decisions had not been taken.
 
The decisions of the Monetary Policy Committee are always made with the information at hand at the time. This information and the assumptions made at each decision point are outlined for all to view in our Monetary Policy Statements.  
 
I can state that issues related to climate change, Te Ao Māori, and financial inclusion, do not distract the Monetary Policy Committee from their task at hand. These issues do, however, influence the stability, efficiency, and inclusion of New Zealand’s financial system. They remain highly relevant to the Reserve Bank in achieving our legislative purpose of increasing economic prosperity and well-being for all New Zealanders.  
 
I regret that the Committee – and society at large – has been confronted with the COVID-19 pandemic, and other recent events that have caused food and energy price spikes. We are a learning institution, and through the open process of the Remit review and the monetary policy review, we will be very clear on our lessons learnt as we forever seek to do a world class job for the people of New Zealand.   
 
Adrian Orr
Governor of the Reserve Bank of New Zealand

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