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RBNZ chief economist says inflation will return to 2% over time

Paul Conway said the central bank is not discussing a shift to tightened policy and warned that Middle East supply shocks could keep oil related effects lingering.

Reported · Written up by our desk · Central Banks

Reserve Bank of New Zealand Chief Economist Paul Conway said the central bank is not discussing a move toward a tighter policy stance, adding that inflation is expected to return to 2% over the medium term, according to FXStreet.

Conway said the Middle East conflict complicates monetary policy because supply shocks can raise the risk that initial price impacts become ongoing inflation pressure. He noted that even with lower oil prices, the shock effects could linger in the economy.

He also said medium term inflation expectations remain anchored and that extra capacity is likely to limit pass through to broader prices. Conway added that the bank will act if inflation pressures from the conflict prove persistent.

The RBNZ Monetary Policy Committee reached consensus last week, and Conway said additional easing of monetary stimulus likely will be needed if the outlook deteriorates. He also pointed to upbeat PMI data that lifted an internal GDP projection and cited upside risks to the September quarter forecast tied to recent developments.

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