RBNZ Governor Adrian Orr said in a Bloomberg interview at Jackson Hole that the economy is well supported with a “very supportive exchange rate” and “strong terms of trade”. The fundamentals for New Zealand are strong with “stable monetary policy”, “low inflation”, “very good fiscal account”, “accommodative exchange rate” and it’s a “very positive story”. But the country has come a period of strong population growth which is easing, therefore, the focus is shifted from “consumption” to “earning.

The “biggest challenge” is to “get inflation to rise” as it’s below mid-point of 1-3% target for a couple of years. To do that, Orr reiterated that RBNZ will hold interest rate low for a long period of time and it’s “in no rush to raise interest rate”. And, Orr also emphasized that “we don’t rule out a cut” if necessary.

According to Orr, trade war will have to be very real and vicious before having an impact on New Zealand significantly. And, trade income will have to fall quite considerably before affecting the country’s term of trade.

Full interview here.

RBNZ Governor Adrian Orr articulated a firm stance today and emphasized that the committee is “laser-focused” on steering inflation back to its target range.

Orr’s acknowledged the progress and RBNZ is “on track” getting inflation back to targets. Yet he also tempers expectations by noting that the journey is far from complete with the admission that they are “not there yet.”

A critical element highlighted by Orr concerns inflation expectations, which he identifies as a significant challenge in the battle against rising He pointed out the cyclical nature of inflation expectations, stating, “the more people think inflation will rise next year, the more inflation will rise next year.”