Target non-traded inflation - 27 October

Target non-traded inflation - 27 October

Non-traded inflation should be the target of the Reserve Bank’s Policy Targets Agreement say the New Zealand Manufacturers and Exporters Association (NZMEA). Non-traded inflation has spiked back out of the target range highlighting the ineffectiveness of our current monetary policy and indicating that the required rebalancing of the economy is not occurring.

NZMEA Chief Executive John Walley says, “Looking at the graph below we can see that non-traded inflation persistently prints above the Reserve Bank’s target band, unless we have a crisis in consumer confidence. The Official Cash Rate tool has no impact.”

“That leaves the OCR punishing the tradable sector for non-traded inflation via a high and volatile exchange rate.”

“Even an indication that policy tools will target non-traded inflation would take some upward pressures off the exchange rate – when is this going to happen?”

“It is simple common sense when you have a problem, to target the source of the problem. The Government and the Reserve Bank need to work together to make this happen.”

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