MNI BRIEF: RBNZ's Orr Says Inflation Risk Bigger Than Slowdown

Reserve Bank of New Zealand Governor Adrian Orr says that the balance of risks in raising interest rates now lies in “letting inflation expectations get away.”

Speaking on the International Monetary Fund’s Governor Talks interview series, Orr said that the central bank was aware that raising rates “too fast or high” ran the risk of a sharp contraction in economic activity, but inflation expectations are the bigger risk. The RBNZ raised its Official Cash Rate by 50 basis points last week to 1.5%, and Orr said it would be “doing more rate rises over the coming quarter,” see: MNI INTERVIEW: RBNZ Needs Neutral Rates Faster-Ex-Official.

The RBNZ’s track for the OCR, published in the February Monetary Policy Statement, included forward guidance for the OCR to reach 3% by September next year. A revised track for the OCR will be published in May, see: MNI STATE OF PLAY: RBNZ Speeds Up Policy On Inflation Concerns.