RBNZ says recent rate cuts will lead to higher inflation, GDP growth, support employment
Plenty of Reserve Bank of New Zealand news today! Earlier we had terse comments from Governor Orr:
- RBNZ Gov Orr says global and domestic low inflation expectations key reason for lower official interest rates
Orr was taking issue with an opinion piece in the NZ press from the business lobby:
And, no slacking off on a Friday from the Bank, publishes an anlalysis piece:
- Have the effects of monetary policy on inflation and economic activity in New Zealand changed over time?
- How effective is monetary policy in the aftermath of the Global Financial Crisis (GFC), in a world of persistently low interest rates?
- Our results show that conventional monetary policy is still as effective as before the crisis.
- … a 25 basis point cut in the Official Cash Rate (OCR) leads to an increase in inflation and GDP growth, and that this response is as big today as it was before the GFC.
- This implies that the recent OCR cuts by the Reserve Bank will lead to - all else equal - higher inflation and GDP growth, and help support maximum sustainable employment
And, if the numbers keep coming in like this ….
expect more cuts.