Reserve Bank of New Zealand Governor Adrian Orr spoke to the NZ Economics Forum at Waikato University earlier.
It was a general sort of speech in whcih he spenet much time explaining the need to balance policy in order to achieve the Bank's mandates. For example:
- The bank had to have regard to “other issues around financial stability and unnecessary volatility and that's where the balancing act gets really hard”
- “Lifting the official cash rate too far or too fast can, for example, lead to a severe downturn; spending and investment collapses, and you ended up with a much higher exchange rate because foreign exchange dealers chase the high-yielding New Zealand dollar, and you crush the export sector.
This comment was a little more specific to the current cycle, indicating that a less aggressive approach to hiking lies ahead:
- “We need to bring inflation back to a target range. But of course, we need to do it over a reasonable horizon so as not to unnecessarily crash the economy and turn temporary, slower growth into permanent unemployment,”
Full text is here:
Download a PDF of Governor Adrian Orr's speech (PDF, 1.45 MB)
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Meanwhile, check out the bid in kiwi$ at 0.6200, it doesn't get much more in your face than this:
