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RBNZ’s Hawkesby says firmer currency will help central bank goals

By Praveen Menon

WELLINGTON (Reuters) – A stronger New Zealand dollar will help the central bank achieve its policy goals, including managing rising inflationary pressures, more quickly, the Assistant Governor of the Bank predicts. Reserve New Zealand (RBNZ) Christian Hawkesby said on Tuesday.

A large amount of stimulus and a small amount of COVID-19 have helped the New Zealand economy recover strongly, but capacity pressures are causing inflation and labor demand while triggering the property market.

“Currently, a higher currency in the short term will actually help us achieve our goals faster because a strong currency will deliver through lower tradable inflation and provide passed to reduce inflation, and we’re managing inflation from the top,” Hawkesby said at an event hosted by KangaNews.

The unemployment rate fell to a record low 3.4% in the third quarter, matching the rate last seen in 2007, as the supply of foreign workers fell due to the closure of international borders. economy due to the COVID-19 pandemic.

The government has said it plans to reopen the border from January, but foreigners will only be allowed in from April.

“One risk we are aware of in the short term is that even if the borders reopen, it will actually become easier for more Kiwis to leave the country than it is for expats,” Hawkesby said. into the”.

“So there is a possibility that the labor market will tighten before loosening more,” he added.

Hawkesby said the RBNZ expected the unemployment rate to fall to around 4%, but this assumes that labor restrictions will ease, which is not something the central bank has confidence in. high.

“We are more confident in the fact that the labor market is tightening and that will create inflationary pressures,” he said.

The New Zealand dollar edged up slightly after Hawkesby’s comments, then steadied more than 0.2% at $0.6737.

Hawkesby also reiterated that the RBNZ’s monetary policy strategy is to take “considered steps”, as seen during last month’s 25 basis point rally.

The central bank has been criticized by critics for its role in exponential property price increases, fueled by pandemic stimulus and historically low interest rates.

In a speech published on Tuesday, outgoing Deputy Governor Geoff Bascand said the RBNZ cannot be blamed for the housing bubble.

“We can rely on house prices by increasing costs and constraining credit, but we cannot change the supply of land or buildings and should not be responsible for the housing market,” Bascand said. .

“Our job (and our ability) is to limit financial stability risks and control overall inflation.”

(Reporting by Praveen Menon in Wellington and Renju Jose in Sydney; Editing by Sam Holmes and Jacqueline Wong)

https://whbl.com/2021/12/06/rbnzs-hawkesby-says-firmer-currency-will-help-central-banks-objectives/ RBNZ’s Hawkesby says firmer currency will help central bank goals

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