Reserve Bank Slammed for Pandemic Policy Failures

A review of New Zealand's monetary policy during the COVID-19 pandemic has found that the Reserve Bank held interest rates at record lows for too long, driving inflation to record highs and triggering a boom-bust cycle.

Former Reserve Bank assistant governor David Archer and MIT professor Athanasios Orphanides wrote in their review that the economy 'overheated to an historically extreme degree' due to the bank's slow response to rising inflation.

The reviewers praised the bank's initial crisis response but criticized its failure to adjust policy as the economy recovered faster than expected. They noted that it took a full year for the bank to lift interest rates, even after unemployment fell to 3.2% and inflation peaked at 7.3%.

Finance Minister Nicola Willis said the review showed that the bank was 'too slow to take its foot off the accelerator' between 2020 and 2021.