RBNZ’s Hawkesby Says Higher Currency Will Help Bank Goals

WELLINGTON, Dec. 7 (Reuters) – A higher New Zealand dollar will help the central bank meet its policy goals faster, including managing the risks of rising inflation, Deputy Governor Christian Hawkesby said on Tuesday.

“For now, a higher currency in the short term will actually help us meet our goals faster, as a strong currency will feed off lower tradable commodity inflation and spill over into lower inflation, and we are managing inflation from above, ”said Hawkesby. said during an event hosted by KangaNews.

Capacity pressures are intensifying in New Zealand with rising inflation and a sharp drop in the unemployment rate.

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The unemployment rate plunged to an even record low of 3.4% in the third quarter, as the supply of foreign workers fell due to the pandemic-induced closure of international borders.

The government has announced plans to reopen the borders from January, but foreigners will only be allowed to enter from April.

“One risk that we are aware of in the very short term is that even when the borders reopen, it will become easier for more Kiwis to leave the country than for foreigners to enter,” said Hawkesby.

“It is therefore possible that the labor market will tighten before slackening,” he added.

Hawkesby said the RBNZ expects the unemployment rate to drift to around 4%, but that assumes labor constraints will ease, which is not something the bank has a high degree of confidence, he said.

“We are more confident that the labor market is tight and that this will create inflationary pressures,” he said.

The New Zealand dollar edged up after Hawkesby’s comments, later settling 0.2% to $ 0.6737.

Hawkesby also reiterated that the RBNZ’s monetary policy strategy was to take “thoughtful action,” as evidenced by the 25 basis point hike last month. Read more

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Reporting by Praveen Menon in Wellington and Renju Jose in Sydney; Editing by Sonya Hepisntall and Sam Holmes

Our standards: Thomson Reuters Trust Principles.

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