Inflation target at 2% risks overheated economy, says BNZ

Thu, 26 Mar 2015

By Pattrick Smellie March 27 (BusinessDesk) - Targeting 2 percent annual inflation could force the Reserve Bank of New Zealand to cut interest rates too sharply and overheat the economy, says Bank of New Zealand, which suggests current low global inflation rates mean the local target is "unreasonably high in the current climate." "We wonder if the target band should be lowered from its current one to three percent or, in the least, that its lower reaches be tolerated as the 'new normal' for the foreseeable future," writes senior economist...

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