RBNZ Governor Adrian Orr told a parliamentary committee, “our core inflation is too high and that suggests at some point monetary policy was too loose for a period.”

“I have already apologized for the current level of inflation. I have already said that the Reserve Bank was party to that,” he added.

However, “the worst mistake we could be having would be fighting deflation, unnecessary unemployment and economic collapse,” he said. “We have ended up with the better problem — but it is a problem — which is inflation, core inflation of 4-6% that we need to put back in the bottle.”

RBNZ raises the Official Cash Rate by 50bps to 3.00% as widely expected, as “core consumer price inflation remains too high and labour resources remain scarce”. It also maintains hawkish bias as “committee members agreed that monetary conditions needed to continue to tighten until they are confident there is sufficient restraint on spending to bring inflation back within its 1-3 percent per annum target range.”

The central bank noted domestic spending has “remained resilient”, supported by a “robust employment level, continued fiscal support, an elevated terms of trade, and sound household balance sheets in aggregate.” Production is being “constrained by acute labour shortages”, heightened by seasonal illnesses and COVID-19. Spending and investment continues to “outstrip supply capacity”. Wage pressures are “heightened”. A range of indicators highlight broad-based domestic pricing pressures.

Full statement here.