New Zealand's decision to speed up monetary tightening is a temporary, inflation-tackling measure and — based on the accuracy of the RBNZ's forecasts of the emergence and persistence of previous episodes of inflationary pressure — should serve as a warning to the world. The Reserve Bank has employed this orthodox tactic amid historic downturn — other economists should take note.
New Zealand has followed the conventional wisdom of raising interest rates to tackle inflation, but this very economic practice is currently being questioned in countries like the US, as some economists argue that the strategy puts excessive pressure on domestic consumers and businesses. While internationally driven prices are transitorily boosting inflation, hiking rates risk prolonging the problem by driving up prices.
There is a 50% chance that, if Labor wins the next Australian election, the Reserve Bank's cash rate target will be at least 0.811 in June 2025, according to the Metaculus prediction community.