RBNZ: New Zealand’s revised monetary policy framework

29 Mar 2019

RBNZThe Governor of the Reserve Bank, Adrian Orr, explained how the business of central banking is evolving, a Press Release from the Reserve Bank reveals.  

When speaking at a Reserve Bank event in Wellington this morning, Mr. Orr said: “The changes to how monetary policy is conducted in New Zealand will bring greater transparency and accountability to how we serve society.

“The dual inflation and employment mandate, and the more transparent committee decision-making structure, will better display our monetary policy processes, benefits, and limitations. The formal inclusion of external members in our decision-making processes also adds to our legitimacy to independently operate monetary policy.”

He also went on to explain the obstacles the Reserve Bank of NZ is set to face.

“For example, we operate in an environment that includes rising global economic inter-dependence, ongoing dominant local and global financial institutions, increased debt burdens, and technological change that challenges employment and financial inclusion norms. We are also faced with the economic implications of climate change, and must ensure the broad financial system plays its role in managing and mitigating these risks. However, central banks have limited tools and persuasion at their disposal, and therefore must use these effectively. We must also be clear to society as to what we can and can’t achieve.”

Mr. Orr noted how despite all this, the Reserve Bank remains grounded and focused on its core business.

“We are committed to meeting the currency needs of the public, ensuring low and stable inflation, supporting maximum sustainable employment, and promoting a sound and efficient financial system. These activities are necessary for economic wellbeing.

“But, we will also work beyond the ‘necessary’. We aim to ensure that both ‘necessary’ and ‘sufficient’ work is done so that the Bank is best able to promote the prosperity and wellbeing of New Zealanders, and contribute to a sustainable and productive economy.”

This speech and press release was shared ahead of New Zealand’s new Monetary Policy framework, which is set to take place on the 1st of April 2019.