PHOTO: Reserve Bank Governor Adrian Orr. FILE
The Reserve Bank governor is expressing concern over the level of inflation predicted by business leaders and forecasters.
According to the recent Reserve Bank (RBNZ) inflation expectations survey, the two-year rate, closely monitored by experts, stands at 2.5 percent, while one-year expectations exceed 3 percent. The quarterly RBNZ survey, which polls 30-50 respondents including business leaders and forecasters, reveals these insights.
Speaking at the Waikato University’s annual economics forum, Adrian Orr refrained from discussing interest rates ahead of the upcoming official cash rate (OCR) decision. However, he highlighted the worrying inflation expectations of industry leaders, stressing their impact on pricing decisions, wage demands, and overall economic behavior, potentially leading to self-fulfilling inflation.
Orr underscored the central bank’s focus on core inflation pressures, suggesting that OCR cuts are not imminent. ASB senior economist Mark Smith echoed this sentiment, noting from Orr’s speech that there’s no immediate rush to adjust OCR settings.
The government mandates the Reserve Bank to maintain inflation between 1 and 3 percent over the medium term, with a mid-point of 2 percent. Orr affirmed the appropriateness of this target but ruled out setting a specific timeframe due to various factors, including the lag in key data releases and the uncertainty of their accuracy.
The next official cash rate decision is scheduled for February 28th.
SOURCE: NEWSHUB