Lucy Craymer

WELLINGTON, (Reuters) – The Reserve Bank of New Zealand’s Chief Economist said that its forecast for strong rising interest rates in 2019 could be affected by economic indicators.

Paul Conway said that this was the best way forward for us. He was speaking about the outlook the central bank gave last week, which was leading the world shift to eliminate the extraordinary stimulus created by the pandemic.

He said, in an interview to Reuters: “If the track is six- or 12-weeks down and it cools a little faster than we expected, then we are able to play again.”

He said, however that the members on the monetary policy panel were well aware of potential risks of inflation expectations slipping away.

Last week, the central bank projected that the official cash rates would rise to 4% from 3% in the next year. This rate will remain at the same level through 2024. It was aggressively higher than economists and other market participants expected.

Conway claimed that consensus was generally reached about the need for the central bank to lower aggregate demand, thereby better matching supply capacity.

According to him, inflation pressures at the moment are roughly evenly split between domestic as well as international drivers. Inflation pressures will begin to ease in the second half, he said.

New Zealand has experienced 6.9% inflation in the three years prior to this quarter. Wage inflation is still low.

I’d love to see wage growth, but that must be supported …. He said that it was important to link the fact workers create more value while at work.

He hesitated to state what minimum wage people need.