Christian Hawkesby: Inflation dynamics - upside down down under?

Panel remarks by Mr Christian Hawkesby, Assistant Governor and General Manager of Economics, Financial Markets, and Banking of the Reserve Bank of New Zealand, to the Bank for International Settlements forum at the Bangko Sentral ng Pilipinas (BSP, the central bank of the Philippines), Manila, 20 August 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Tēnā koutou katoa,

Thank you for the opportunity to join the panel.

Thirty years after the Reserve Bank of New Zealand first adopted an inflation targeting regime to deal with inflation that was too high, central banks now have a different problem: inflation being too low.

One of the key challenges of our time is for central banks, academics and financial markets to comprehend this new environment and deliver the appropriate policy response. It is testing our understanding of what is normal and welcome for policymakers when it comes to inflation, interest rates, wage growth, and fiscal spending.

So I would firstly like to thank the organisers and the presenters at this conference for their efforts as we explore "Inflation dynamics in Asia and the Pacific".

In these panel remarks, I will talk about the New Zealand experience, specifically:

• Our assessment of what has caused this period of low inflation;
• What we have learnt as policymakers about inflation dynamics, and how much that has changed our approach to setting monetary policy; and
• How we are applying all this to our monetary policy outlook for 2019.