Review of Reserve Bank Monetary Policy Response Faces Scrutiny

A government-commissioned independent review of the Reserve Bank of New Zealand's monetary policy response to the Covid-19 pandemic found that the policy lost its way and should have stopped stimulating the economy sooner. The review, conducted by Athanasios Orphanides and David Archer, noted that CPI inflation reached a 32-year high of 7.3% in 2022, while unemployment fell to an unsustainable historic low of 3.2% in late 2021. Political figures, including Chlöe Swarbrick and Chris Hipkins, have questioned the timing and agenda of the review's release.

The review identifies lessons for improving monetary policy response to future major economic events. The findings highlight the extreme degree to which the economy overheated during the pandemic period, prompting discussion about the effectiveness of the Reserve Bank of New Zealand's past actions. The review includes 12 specific recommendations.