A meaningless virtue signalling change

Stuff reports:

The Reserve Bank will be required to consider how it can maximise employment when it is setting interest rates.

Adrian Orr, who becomes governor of the Reserve Bank on Tuesday, signed the new policy targets agreement with Finance Minister Grant Roberton in Parliament on Monday.

As widely flagged, the agreement will require the bank to consider not only inflation when considering the ideal level of the official cash rate (OCR).

“The Government expects monetary policy to be directed at achieving and maintaining stability in the general level of prices over the medium term and supporting maximum sustainable employment.”

This sounds like a change but it isn’t really. It is just Labour virtue signalling.

Some other central banks have this dual directive also. And they all interpret it pretty much the same way – that higher inflation doesn’t lead to lower unemployment in the medium term, so by keeping inflation low we are doing our job.

I doubt it will have any significant impact on OCR decisions.