Research Note: The Unreserved Bank of New Zealand: Why unorthodox monetary policy needs boundaries

Dr Oliver Hartwich
Dr Eric Crampton
Professor Robert MacCulloch
13 August, 2019

With its rate cut on 7 August 2019, the Reserve Bank of New Zealand surprised markets and sent a strong signal that unorthodox or unconventional monetary policy could be on the cards.

We argue that, especially under unconventional circumstances, predictability of the Reserve Bank is needed to retain its credibility, independence and reputation. In our view, this would also require changes in the wording of the Remit of the Monetary Policy Committee.

As the Reserve Bank takes on fiscal functions, its political neutrality and commitment to monetary stability, as well as maximum sustainable employment, need to be re-emphasised.


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