Adrian Orr: Navigating at low altitude - monetary policy with very low interest rates

Speech by Mr Adrian Orr, Governor of the Reserve Bank of New Zealand, at the Reserve Bank of New Zealand Museum and Education Centre, Wellington, 10 March 2020.

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

Central bank speech  | 
11 March 2020


The Reserve Bank of New Zealand, Te Pūtea Matua, is tasked with promoting a sound and dynamic monetary and financial system. We enable New Zealanders to get on with their daily lives with the maximum confidence possible about their means of exchange (money), its purchasing power here and abroad, and the reliability and efficiency of critical financial services they rely on. This is our contribution to Aotearoa, New Zealand, to "promote the prosperity and well-being of New Zealanders, and contribute to a sustainable and productive economy."

As kaitiaki (caretakers) of Te Pūtea Matua, our activities involve continuous policy assessment as to the most effective monetary policy and financial stability tools, and their best application. This is highlighted by the ongoing Reserve Bank Act Review, which is aimed at ensuring we have a modern monetary and financial policy framework. The optimal frameworks can change over time based on global economic activity, changing technology, and evolving consumer and investor preferences as to how they transact and engage with the financial system. We must be able to identify and respond to circumstances in an optimal fashion to continue to meet our mandate for Aotearoa, New Zealand.

A significant change is confronting our work at present, namely the low global (consumer) price inflation which has led to unprecedentedly low global nominal interest rates. Our monetary policy framework needs to operate effectively and efficiently in this low inflation and interest rate world, and we must be aware of the intended and unintended consequences of our policy actions for inflation, employment, and financial stability and efficiency.