Summary
In this conversation, Paul Conway, the Chief Economist for the Reserve Bank of New Zealand, discusses the recent cuts to the official cash rate and the underlying economic factors influencing these decisions.
He explains the dynamics of inflation in New Zealand, the impact of administered prices, and the role of government policies in shaping inflationary trends. Conway also reflects on the effectiveness of inflation targeting and explores potential alternatives to this approach.
Takeaways
The Reserve Bank cut the official cash rate by 50 basis points due to easing inflation pressures.
Headline inflation is at the midpoint of the target range, allowing for rate cuts.
Imported deflation is contributing to lower headline inflation numbers.
Non-tradable inflation remains a concern, still above the target band.
Administered prices and lack of competition contribute to domestic inflation.
Government fiscal policies have played a role in reducing inflation.
Inflation targeting has been effective despite recent challenges.
There is a need to consider alternatives to traditional inflation targeting.
The purchasing power of the dollar has been affected by inflation.
Deflation poses significant challenges for monetary policy.
Chapters
00:00 Reserve Bank's Recent Rate Cuts
05:42 The Impact of Domestic Inflation
11:12 The Role of Fiscal Policy
16:29 Exploring Alternatives to Inflation Targeting
In interests of getting this interview recorded on Friday afternoon out in a timely fashion, I’ve published this as recorded. The full transcript is accessible with the video.
This has been published to all and is available to all to watch and share. I’d recommend listening and watching in its entirety to get the nuances.
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