Wednesday, 21st July, 2021
When asked about strategy in the ring, the great Mike Tyson – up there with Adam Smith and J.M. Keynes as one of history’s great Economic sages – once said, “everybody’s got a plan until they get punched in the mouth.”
Until relatively recently, major central banks had similar plans for how they expected the next couple of years to play out. While the pandemic fallout hadn’t been as bad as feared in many parts of the world, the recovery would be a fragile thing and monetary policy would need to remain highly accommodative for some time as the labour market wended its way back to health. ‘Transitory’ factors would see inflation tick up over the short term, before once again abating. Rate hikes would come slowly and at a gradual pace. The RBNZ was very much part of this cohort.