RBNZ Assistant Governor Christian Hawkesby said in a speech, “while the demand side of the economy has been more resilient than expected when COVID-19 arrived, the disruption to the supply side of the economy has also been more prolonged than anticipated.” Also, the developments combined are “likely to have reduced the level of maximum sustainable employment”.
He reiterated that in the latest Monetary Policy Statement, it’s noted RBNZ had “more confidence that employment was already at its maximum sustainable level and that pressures on capacity would feed through into more persistent inflation pressures over the medium-term”.
Thus, the “least regrets policy stance” was to “further reduce the level of monetary stimulus so as to anchor inflation expectations and continue to contribute to maximum sustainable employment.” Also, ” whether or not a monetary policy response would be required in response to future health related lockdowns would depend on whether there was a more enduring impact on inflation and employment”
