RBNZ to continue to take cautious approach to tightening - ANZ
At face value, analysts at ANZ don’t believe the proposed changes to the RBNZ’s mandate and operating model will have a significant impact on the way monetary policy is conducted.
“Shifting the focus away from the specific 2% target midpoint is arguably a little more meaningful. It hints at inflation being allowed to run on average at a higher rate than it would otherwise. Other central banks seem to be having that debate too, and at a time of lower real neutral rates, higher inflation targets potentially provide policymakers with a little more policy wriggle room. But just because a higher inflation rate is targeted, that doesn’t mean that it can necessarily be achieved in a world of ongoing structural deflationary pressures.”
“And there are financial stability considerations too – systematically running policy looser is not without its risks. All up, it is another factor that could see the RBNZ continue to take a cautious approach to tightening policy this cycle. But ultimately we see this possible change as being about flexibility, which we fully support.”