Mortgage holders will wince as RBNZ takes another shot at bringing inflation back into the target zone

The  Reserve Bank  has  raised  the  official cash  rate  to  2% – but will  that  slay  the  inflationary  beast roaming  the  countryside.? 

Point of  Order   doesn’t  think  so.

Reserve Bank governor  Adrian  Orr made  the right  belligerent  noises  as  he  fired  the  bullet  today  but  he  needed  a  fiscal -policy volley  from  Finance Minister Grant Robertson  to  demolish   the  monster.

Inflation, according  to Robertson,  is  all  due  to overseas  factors — the  war  in the  Ukraine, supply  chain  congestion,  China’s  economic  problems,  you  name  it  — but  little  has  been  done  to  contain  it in  the  term of  the  Ardern  government.

As Professor  McCulloch pointed out  in the  NZ  Herald with reference to a  document  signed  off   and “agreed by”  the Finance Minister and Reserve Bank Governor, it says inflation in NZ is to be held at 1 to 3 percent over the medium term.

RBNZ board is pressed to put many hard questions about surprise slashing of the OCR

Michael Reddell, on his Croaking Cassandra blog, has scolded the Reserve Bank Monetary Policy Committee about its prowess – or lack of it – in the communications department.

His concerns were raised by the committee’s decision – announced yesterday along with the latest Monetary Policy Statement – to lop the Official Cash Rate by 50 basis points to 1 per cent.

As Westpac commentators noted:

“This was a stunning decision – in the history of the OCR, the only times the OCR has been cut by 50bps or more have been after the 9/11 terrorist attack, during the GFC, and after the Christchurch earthquake. We are very surprised that the RBNZ decided to cut 50bps in today’s environment.”

Reddell was surprised, too, and is urging the RBNZ’s board to ask hard questions about just what went on before the announcement.