RBNZ Governor Adrian Orr said in an IMF event, “we’ve been acting reasonably aggressively to tighten monetary conditions. We’ve provided strong forward guidance that we expect to be doing more rate rises over coming quarters.”
But he also noted, “that was more about doing it sooner rather than believing we have to do more,” he said. “It’s just getting on with it so people can understand what we are about.” Back in February, RBNZ projected that OCR would peak at 3.25% at the end of 2023.
Raising rates too high and “you really run the risk of having a sharper than needed slowdown in economic activity,” he said. “On the other hand, if you go too slow its inflation expectations that will get away from us.”
“At the moment, the balance of risks as far as the monetary policy committee is concerned is very much weighted to constraining those inflation expectations in the medium term,” he said. “We know the long-term cost of letting inflation expectations get away.”
