IMF: RBNZ should continue swift policy normalization

In a report, IMF urged RBNZ to have “significant increases” in interest range in the near term to address inflation as a priority.

IMF said, “with the recovery well-entrenched, tight labor market conditions, and elevated inflation, it is appropriate to withdraw fiscal and monetary support as envisaged.”

Fiscal policy should “remain agile”. “While the scheduled tightening of fiscal policy is appropriate, the authorities should calibrate the fiscal stance to the evolution of the pandemic and economic conditions, providing additional, targeted support where needed.”

As for monetary policy, IMF said it should remain “data dependent, and continued, swift policy normalization will be appropriate under baseline conditions.”

“Given New Zealand’s strong cyclical position and inflationary pressures, significant increases in the Official Cash Rate in the near term are appropriate, signaling the RBNZ’s commitment to addressing inflation as a priority.”