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MNI BRIEF: RBNZ Sets Sights On Maintaining Inflation Targeting

MNI (PERTH)
MNI (Perth)

The Reserve Bank of New Zealand has called on the Government to retain its 1-3% inflation target but advocated the removal of house price sustainability from its remit after the first round of its monetary policy remit review. The RBNZ advised Finance Minister Grant Robertson that its preliminary position was that there was "not a strong enough case" for changing the inflation target from 1-3% after receiving public submissions as part of the five-yearly review.

However, the RBNZ said there was "broad but not complete" support from submitters for not including house price sustainability in the remit. It noted that one submitter had argued house price sustainability could be considered through the letter of expectations from the Finance Minister instead of the remit. While public submissions "generally supported" retaining the Consumer Price Index as the key price measure targeted by the monetary policy committee, there were some concerns about how housing costs were reflected in the CPI. The RBNZ said it believes the CPI remains fit-for-purpose and the best price measure.

The RBNZ also suggested the remit could include an "explicit hierarchy" of objectives to better manage trade-offs between its price stability and maximum sustainable employment objectives. There will be another round of consultations that will end early next year, with the Finance Minister set to make his final considerations next April. The next remit will run until 2028.


Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
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Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
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