RBNZ governor set to steal the show in monetary policy debut

Bloomberg

Rarely has a New Zealand interest-rate decision been more keenly awaited when there’s no change of rates in sight.
Reserve Bank Governor Adrian Orr delivers his first Monetary Policy Statement on Thursday and is expected to keep borrowing costs at a record low. Yet there’s considerable interest in how Orr will present the policy outlook. Since taking the RBNZ’s helm in March, he’s embarked on a media blitz and revealed a fondness for a colourful turn of phrase.
“He’s demonstrated that he has a much more open communication style and everyone is pretty eager to see what he has to say,” said Liz Kendall, senior economist at ANZ Bank New Zealand in Wellington. “But if anything changes it’s likely to be style rather than substance. It’s still a picture of rates on hold until we see a broadening of inflation pressure.”
While the economic outlook has barely budged in recent months, a lot has changed at the central bank. In addition to Orr’s arrival, the RBNZ’s mandate has been broadened to include maximising employment as well as achieving price stability. Its governance structure is also being overhauled to make a committee responsible for policy decisions rather than the governor alone. Those developments have heightened interest in Orr’s first press conference, even though he’s expected to keep the official cash rate at 1.75
percent and continue to forecast no increase before mid-2019.
ELUSIVE INFLATION
Since an ill-fated tightening in 2014 under previous governor Graeme Wheeler, the RBNZ has been forced to slash its interest-rate forecasts as inflation failed to materialise, adding uncertainty to the current outlook.
Inflation slowed to 1.1 percent in the first quarter, near the bottom of the RBNZ’s 1-3 percent target band and well shy of its 2 percent goal. Unemployment has also dropped, hitting a nine-year low of 4.4 percent, but wage increases remain muted.