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Financial News: RBNZ's Hawkesby Says 50 Bps Rate Cut Reduce

RBNZ's Hawkesby Says 50 Bps Rate Cut Reduce Probability Of Unconventional Tools

08/20/2019 - 23:52:00 (RTTNews)

(RTTNews) - A decisive rate cut in August has reduced the need for unconventional tools, Reserve Bank of New Zealand Assistant Governor Christian Hawkesby said at a panel discussion in Manila.

"Decisive action now gave inflation the best chance to lift earlier, reducing the probability that unconventional tools would be needed in the response to any future adverse shock," he said at the Bank for International Settlements forum at the Bangko Sentral ng Pilipinas.

At the August meeting, RBNZ had cut the official cash rate by 50 basis points to 1.00 percent to underpin economic growth and revive inflation.

While some commentators questioned whether monetary policy still works in the current environment, Hawkesby said, "Our assessment is that monetary policy is still effective in influencing inflation in New Zealand, through a number of channels."

The Reserve Bank adopted an inflation targeting regime thirty years ago to deal with a too high inflation. But now the bank faces a different problem, inflation being too low.

"It is testing our understanding of what is normal and welcome when it comes to inflation, interest rates, wage growth, and fiscal spending," Hawkesby added.

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