RBNZ’s Hawksby: We had more confidence that employment was at its maximum sustainable level


RBNZ Assistant Governor Christian Hawkesby crossed wires, via Reuters, during early Tuesday. The Reserve Bank of New Zealand’s (RBNZ) senior official conveyed the RBNZ confidence over employment and inflation during the latest monetary policy meeting while speaking on the title “A least regrets approach to uncertainty”

Key quotes

Early discovery of vaccines against covid-19 has supported a stronger-than-expected recovery in the global economy.

August monetary policy statement noted we had more confidence that employment was at its maximum sustainable level.

Demand for our goods exports has fared much better than during previous global downturns.

Also benefited from a robust recovery in the chinese economy, our largest trading partner.

Monetary and government spending policies have supported a strong recovery in spending.

Government’s wage subsidy scheme is a policy that has been particularly effective in supporting the wider recovery.

Business investment has also picked up as the economy has recovered.

Looking ahead, we see the level of house prices as unsustainable relative to their fundamental drivers.

In August, committee agreed their ‘least regrets policy stance is to further reduce monetary stimulus to anchor inflation expectations’.

The disruption to the supply side of the economy has also been more prolonged than anticipated.

There have been significant disruptions to supply chains, particularly related to the shipping industry.

Given emergence of transmissible variants of covid-19, disruptions to movement of goods & people globally looks likely to continue over medium term.

Noted that monetary policy response would be required for future health lockdowns if there was more enduring impact on inflation, employment.

In a good position to navigate the period ahead, with the labour market operating at maximum sustainable employment.

Covid-19 has also made it more difficult for firms to source labour.

There has been tronger than expected domestic economy and associated improvement in job security.

The recovery phase has also seen house prices grow rapidly from already elevated levels.

Market implications

NZD/USD seesaws around 0.7030 following the news, fails to cheer cautiously optimistic comments from RBNZ policymaker amid sour sentiment.

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