RBNZ’s Orr reappointed for second five-year term

New Zealand central bank governor Adrian Orr has been reappointed for a second five-year term, giving him the opportunity to complete an aggressive tightening cycle as the bank seeks to regain control of inflation.

Finance Minister Grant Robertson reappointed Orr after a “unanimous recommendation” from the Reserve Bank Board, Robertson said on Tuesday in Wellington. Orr’s second term begins on March 27.

“Adrian has demonstrated the skills, knowledge and experience to help steer the financial system through the 1-in-100 year economic shock of the pandemic,” Robertson said in a statement. “I have full confidence that he will continue to display the same integrity and leadership in performing his duties as governor in what is still a challenging environment.”

Orr, 59, became governor in March 2018 and oversaw the RBNZ’s pandemic response, slashing interest rates to a record low and launching quantitative easing to prop up the economy. Now, like counterparts around the world, he is battling inflation in the aftermath of that extraordinary monetary stimulus.

The RBNZ was among the first central banks to begin raising rates in 2021 and it led the shift to outsized hikes earlier this year, foreshadowing similar moves in the US, Australia and Canada.

Still, Orr has been forced to defend the bank against criticism it provided too much stimulus after inflation soared to a 32-year high of 7.3%.

The RBNZ has lifted its Official Cash Rate by 3.25 percentage points over the past year, taking it to 3.5% in the most aggressive tightening since the OCR was introduced in 1999. It is expected to continue hiking at pace, with the next policy decision on November 23.

Two-year inflation expectations jumped to 3.62% from 3.07% in a quarterly survey published by the RBNZ today, suggesting the bank has more work to do to get inflation back within its 1-3% target band.

The rapid tightening to date has seen mortgage rates surge and the housing market enter a downturn.

—Bloomberg