- Graeme Wheeler, RBNZ
The RBNZ signalled that it will need to cut the cash rate at least once more to get inflation back to the target range, but emphasized the limited impact monetary policy can have in such unusual global economic circumstances. The Reserve Bank of New Zealand's current forecasts for the economy imply 35 basis points of more easing, but emerging data would determine if more or less stimulus than this will be required. Governor Graeme Wheeler says that their present judgement is that the current interest rate track, involving an expected 35 basis points of further interest rate cuts, balances a number of risks weighing on the economy while generating an increase in CPI inflation back towards the midpoint of the 1% to 3% target range.
Unlike some larger economies where interest rates are at or near zero, and in some cases negative, the RBNZ has seen the need to keep some ammunition up its sleeve in case the New Zealand economy is hit by an external shock. With interest rates at record-low levels in many economies, there has been a growing debate over the effectiveness of monetary policy in boosting output and inflation. However, Wheeler is a firm believer of maintaining a flexible policy target, and said that ditching the policy when times become tougher would lose the bank its credibility.
© Dukascopy Bank SA