Academic journal article The Reserve Bank of New Zealand Bulletin

Everyone Needs to Play Their Part

Academic journal article The Reserve Bank of New Zealand Bulletin

Everyone Needs to Play Their Part

Article excerpt

10 December 2008

Reserve Bank Governor Alan Bollard said today that further monetary policy easings depend on all sectors of the economy responding to reduced demand and not adding inflationary pressures to the system.

"We need to see inflationary pressures reducing significantly across the board, if we are to keep on easing monetary policy, thus helping the New Zealand economy to recover," Dr Bollard told a Wellington business audience.

"With a global economic slowdown, for some commentators, concerns over inflation appear to have taken a back seat. Many commentators are of the view that lower commodity prices and week economic activity will drive inflation significantly lower.

"It is worth remembering that for the moment, however, inflation rates in New Zealand remain very high. In the September 2008 year CPI inflation reached 5.1 percent, the highest rate since 1990. The higher rates of inflation are broad-based.

"Common drivers have been: strong world commodity prices, domestic capacity pressures due to demand; and sizeable price increases in areas not directly exposed to a high degree of competition, such as local authority rates and electricity prices. …

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