RBNZ PTA: Expanded mandate doesn't dilute focus on price stability - TDS

The RBNZ published its new Policy Targets Agreement (PTA) for RBNZ Governor Adrian Orr to sign ahead of assuming the role tomorrow and the Bank did not dilute its focus on maintaining price stability, a welcome confirmation for the markets.

Key Quotes

“The policy target remains focused on the 2% mid-point (of the existing 1-3% target band) over the medium-term. There was speculation that the 2% focus could be dropped.”

“Instead, the dual mandate was expressed with a second monetary policy objective of the widely-telegraphed "... and contribute to supporting maximum sustainable employment within the economy".”

“The government acknowledged that sometimes these two objectives may conflict, and that "there are limits as to the extent to which monetary policy can influence employment outcomes". This leads to the second crucial point for the markets: the absence of quantitative target(s) for employment and the unemployment rate. There were concerns that the government may have included a sub-4% unemployment rate target.”

“Bottom line: this is not a radical overhaul of the PTA as the 2% mid-point remains as a key objective, and the RBNZ already considers the state of the labour market when assessing the stance of monetary policy.”