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No reason to rewrite agreement with the RBNZ despite inflation fail – NZ FinMin English

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 9, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    New Zealand’s Finance Minister Bill English was on the wires earlier today, noting that the Government sees no reason to rewrite its Reserve Bank agreement, despite its failure to lift inflation back to its target range under current policy settings.

    Key Quotes:

    "We are always open to a discussion with the governor about what works best. In the past there have been those discussions and inevitably they get around to the area of either stimulus for the economy or otherwise, which is ultimately tax. I think the way we look at it is the government controls the spending and that side of the economy and the Reserve Bank governor is responsible for monetary policy. I don't think there will be any move on the government side on the tax side."

    "But you can see the problem. We are relying on the CPI which for the last 20 years has been a pretty reasonable and effective measure. It now happens we are in circumstances where it's less meaningful than it was, but it's less clear what other measures might be more useful. The bank at least has a positive proposition about what core inflation is, bearing in mind its responsibility to keep inflation in the band, and we'll have a look at that and what that means."

    But he added that he saw "no particular reason to rewrite" the PTA and a new framework was not needed.

    On Tuesday, Prime Minister John Key and English both stressed the economy was not suffering from the low inflation rate, although deflation was a concern, but said the Government was happy with Wheeler's performance.
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