Once again, PM should not comment on Reserve Bank decisions

Stuff reports:

Prime Minister John Key has sent a shot across Reserve Bank governor Graeme Wheeler’s bows, effectively warning him not to keep interest rates unjustifiably high as inflation heads lower.

But Key stopped short of calling for an interest rate cut at the bank’s monetary policy review on Thursday.

He noted that while the bank had flexibility it should set monetary policy so that inflation returned to the midpoint of its 1 per cent to 3 per cent target band. …

Key said oil prices were coming down, the exchange rate was still reasonably strong and imported inflation appeared low. In light of that “it’s not an option for the bank to raise interest rates”.

That’s not a decision for the PM. While he is correct that there is no reason for interest rates to go up, he is the PM – not a financial commentator. It is a bad look to have the PM state that something is not an option for the Reserve Bank, because it can look like pressure on them to do as the Government wants.