The Reserve Bank of New Zealand and the Finance Ministry on Thursday signed a new Policy Targets Agreement, which include monitoring of asset prices and a more refined inflation target.
The agreement, signed by Finance Minister Bill English and incoming Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler, will take effect on September 26, when Wheeler starts his five-year term as governor.
Under the agreement, the bank should focus on keeping future average inflation near 2 percent, though the CPI target remains unchanged at 1-3 percent on average over the medium term.
"The focus on the 2 percent midpoint will help better anchor inflation expectations," Wheeler said.
The deal also includes a stronger focus on financial stability, by including asset prices in the range of indicators the bank's monitors, and requiring the bank to have regard to the soundness and efficiency of the financial system in setting monetary policy.
English said the government is working with the Reserve Bank and Treasury to assess whether further macro-prudential tools could help moderate credit cycles, by building additional resilience when it is likely to be needed.
by RTT Staff Writer
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