RBNZ Assistant Governor Christian Hawkesby said the -50bps rate cut back in August was a “tactical decision”. A key part was that front-loading would “give inflation the best chance of meeting our policy objectives”. In particular, “it would demonstrate our ongoing determination to ensure inflation increases to the mid-point of the target”. Such commitment should ” support a lift in inflation expectations and an eventual lift in actual inflation.”
The “regret analysis” suggested ” it would be better to do too much too early, than do too little too late.” The alternative approach could risk “inflation remaining stubbornly below target,”. Inflation expectations could “drift lower” and create an “even more challenging task to achieve our objectives.”
