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Inflation is the Reserve Bank’s responsibility

29/01/2018

As usual this economic numpty thinks the post’s author makes a compelling case

croaking cassandra

Late last week Statistics New Zealand released the latest quarterly inflation numbers.  For years, the Reserve Bank –  explicitly charged with the job –  has told us inflation is heading back to settle around two per cent.  If anything, most market economists have been even more of that view –  typically their forecasts of inflation and/or interest rates have been higher than those of the central bank. Indeed, on the very morning the CPI numbers were to be released one prominent market economist was reported in the Herald as picking that the Reserve Bank would be –  indeed, should be – raising the OCR as early as July.

But for years, the Reserve Bank has been consistently wrong.  The year to December 2009 was the last time their preferred measure of core inflation was at 2 per cent, the midpoint of the target range (a goal explicitly highlighted in the…

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