How New Zealand central bank’s mostakes after 2019 led to inflationx`

Graeme Wheeler, former Governor of the Reserve Bank of New Zealand, and Bryce Wilkinson, Senior Research Fellow at The New Zealand Initiative released a research note. The paper mainly attributes the outbreak of inflation in many economies to six central bank mistakes.

  • were too confident about their monetary policy framework;
  • were too confident about their models;
  • were too confident they could control output and employment;
  • lost their focus on price stability and took on too many mandates;
  • faced conflicts in some cases with conflicting ‘dual mandate’ objectives; and
  • were distracted by extraneous political objectives, such as climate change.

Michael Reddel, the goto person on NZ economy, rebuts the paper point by point.

In the end there simply isn’t a great deal there. It is good to have more voices sheeting home responsibility for high core inflation to the central banks. If you accept the assignment of responsibility for achieving an objective, you are responsible when things fall short (even if, as Wheeler argues was true of his own stewardship) you’ve done the best job possible with the information to hand at the time. How much that sort of explanation is sufficient to the current situation can and should be debated, but it probably needs much more engagement with data, and forecasts etc, than WW have room for in their piece.

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