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  • rmacculloch

The RBNZ's "Summary Record" of its OCR announcement is one big fat political "Non Est Mea Culpa".

For a macroeconomist, the Reserve Bank's Press Release of the "Summary Record" of the meeting of its Monetary Policy Committee today, which raised the OCR to 3%, is so embarrassingly cringeworthy that it is hard to read.


It is largely devoid of economics, but stocked full of politics. It amounts to one big essay on behalf of the members of the MPC trying to shift blame away from themselves for NZ's high inflation rate. Instead it argues that the war in Ukraine, "lockdowns in some Chinese cities" (!?), labor markets, and more, are guilty of causing high inflation in NZ.


As a Roman would say, "Non Est Mea Culpa". It reads like a long-winded and desperate attempt by the MPC to rehabilitate their shredded credibility and establish a "narrative" that throws the financial press off their case.


On and on the RBNZ goes arguing how other countries are in the same boat. On and on it goes about how world-wide supplies are being disrupted by "high levels of sickness from COVID-19 and other illnesses". You would think we were still in the middle of the pandemic from how they write. And what "other illnesses" are they talking about!?


Not one word of admission that the Bank's own reckless Quantitative Easing / Money Printing program was a mistake. Not one word about how the same Monetary Policy Committee went & cut interest rates by 50 basis points in August 2019 which shocked the market by signaling, even before the pandemic, that this was a "new-style" RBNZ that couldn't care less about letting inflation get out of control. That cut brought interest rates close to the zero lower bound when there was no good reason to do so and triggered a ferocious (public) reaction from the likes of .. me.


In short, the MPC's job was to keep inflation between 1 and 3%. That target was "agreed" and signed off between the Governor & Minister of Finance. The Summary Record says at the end "inflation is expected to return to the Committee’s 1-3 percent target range by the middle of 2024, but this will require a better balance between supply and demand". That line says it all. It should trigger the firing of the whole lot of them. There was no need for NZ to ever be in this position. We were once better than the rest .. now we are "the rest".


Sources:

https://www.rbnz.govt.nz/hub/news/2022/08/ongoing-monetary-tightening