Kerre Woodham Mornings Podcast Kerre McIvor: Once you start tinkering, the Govt need to take some culpability for what happens
Feb 22, 2022
06:46
Everyone agrees it's not a matter of if, but of by how much, the Reserve Bank raises its official cash rate today.
Commentators are picking a rise of 25 basis points, which means rising a quarter of a percentage point to 1%. However, others wouldn't be surprised to see a rise of 50 basis points, I think, bookies are putting it around 30%.
The reason is that we have inflation galloping away on us, and the Reserve Banks remit requires the bank to keep inflation between 1% and 3% on average over the medium term, and that's achieved by setting the official cash rate, which is reviewed about seven times a year.
However, since 2018, when the Labour New Zealand First Coalition became Government, the Reserve Bank was given another mandate and under the so-called dual mandate, the Reserve Bank of New Zealand has to aim for price stability and full employment.
In an opinion piece by Dr. Oliver Hartwich in the New Zealand Herald this morning, and he says, as any economist will tell you, you can temporarily reduce unemployment with lower interest rates. But you can't do it forever. As with anything, there's always a trade-off and he sees any such activism will come at the expense of higher prices and voila, here we are!
Once you start tinkering, then really the Government does have to take some culpability in what happens as a result.
Commentators are picking a rise of 25 basis points, which means rising a quarter of a percentage point to 1%. However, others wouldn't be surprised to see a rise of 50 basis points, I think, bookies are putting it around 30%.
The reason is that we have inflation galloping away on us, and the Reserve Banks remit requires the bank to keep inflation between 1% and 3% on average over the medium term, and that's achieved by setting the official cash rate, which is reviewed about seven times a year.
However, since 2018, when the Labour New Zealand First Coalition became Government, the Reserve Bank was given another mandate and under the so-called dual mandate, the Reserve Bank of New Zealand has to aim for price stability and full employment.
In an opinion piece by Dr. Oliver Hartwich in the New Zealand Herald this morning, and he says, as any economist will tell you, you can temporarily reduce unemployment with lower interest rates. But you can't do it forever. As with anything, there's always a trade-off and he sees any such activism will come at the expense of higher prices and voila, here we are!
Once you start tinkering, then really the Government does have to take some culpability in what happens as a result.
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