Academic journal article The Reserve Bank of New Zealand Bulletin

Monetary Policy Review: Media Statement

Academic journal article The Reserve Bank of New Zealand Bulletin

Monetary Policy Review: Media Statement

Article excerpt

Hon Dr Michael Cullen

Minister of Finance

28 February 2001

"Professor Lars Svensson's Review of the Operation of Monetary Policy is an intelligent and careful piece of work which will require an intelligent and careful response," Finance Minister Michael Cullen said on the report's release today.

"I agree with many of Professor Svensson's observations on the history of monetary management in New Zealand, particularly his criticism of the MCI which I was also critical of, regarding it always as mechanistic, clumsy and confusing.

"But the MCI was abandoned two years ago and Professor Svensson is much more complimentary about the conduct of monetary policy since then, describing it as "entirely consistent" with best international practice," Dr Cullen said.

The report recommends that the Bank should continue to interpret the 0 to 3 percent inflation range as a medium term target of 1.5 percent and that consideration be given to making this an explicit instruction when the Policy Targets Agreement next comes up for renegotiation.

"Clearly Professor Svensson does not attach any urgency to this recommendation because he sees it as entrenching rather than changing current practice. …

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