New Zealand’s Reserve Bank governor has issued an extraordinary statement of regret as the central bank reviews its own response to COVID-19.
On Tuesday, Adrian Orr reacted to growing criticism of the central bank’s monetary policy during the pandemic.
Like many central banks in developed countries, the Reserve Bank of New Zealand (RBNZ) engaged in mass quantitative easing in the immediate aftermath of COVID-19 lockdowns.
This pumped tens of billions of dollars into the system when the official cash rate was at the emergency setting of 0.25 per cent, and allowed investors to prop up an ailing economy.
At the time, Mr Orr defended the bank’s actions, saying it was “very much strictly ballroom” and that the RBNZ was “not doing anything that any other central bank is not doing”.
Two years later, inflation is skyrocketing, and many believe the RBNZ’s stimulatory efforts have been a contributory factor.
One such critic is Mr Orr’s predecessor as governor, Graeme Wheeler, who on Tuesday published a report titled ‘How central bank mistakes after 2019 led to inflation’.
The report alleges overconfidence by central banks about their monetary policy framework and models, and a loss of focus on inflation.
Mr Orr took the step of responding to the report with an unprompted statement, noting the bank had already begun reviews into its actions.
“Inflation is no one’s friend and causes economic cost,” the statement read.
“I acknowledge that consumer price inflation is at 7.3 per cent, above the (RBNZ’s) target range of 1-3 per cent.
“I also acknowledge that the monetary policy committee’s decisions over recent years have influenced this outcome.
“I regret that the committee – and society at large – has been confronted with the COVID-19 pandemic, and other recent events that have caused food and energy price spikes.
“Through the open process of the remit review and the monetary policy review, we will be very clear on our lessons learnt as we forever seek to do a world class job for the people of New Zealand.”
(Australian Associated Press)