cover image: Figure 1 Shadow Board divided over whether to tighten monetary policy over the coming year 100

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Figure 1 Shadow Board divided over whether to tighten monetary policy over the coming year 100

11 Apr 2021

The focus on the housing market has become more intense in recent months, and the recent announcements of policy measures to address house price sustainability has reduced the appetite for tighter monetary policy over the coming year. [...] Given the recent announcement of measures such as extending the bright-line test to 10 years and the removal of interest deductibility for investment properties, Shadow Board members felt a wait and see approach was appropriate to assess the effects on the New Zealand economy. [...] Beyond the April meeting, board members were divided over whether to tighten monetary policy, with some members highlighting the winding down of the Large Scale Asset Purchase Programme (LSAP) and Funding for Lending Programme (FLP) as the primary means of commencing the tightening of monetary policy. [...] The most likely tightening in the year ahead will be in the form of not extending the LSAP and FLP programmes, which are proving to have limited effectiveness anyway. [...] While the Jo Tozer RBNZ may not wish to constrain re-emergent growth in the post-COVID environment, these inflationary pressures and business concerns may require a slight rise in the OCR in the second half of the year.
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4
Published in
New Zealand