RBNZ's Governor Orr: The financial system is resilient to rising unemployment

tweet at 2:37pm: RBNZ'S CONWAY SAYS SIGNIFICANT SLOWDOWN COMING IN HOME CONSTRUCTION

tweet at 2:13pm: RBNZ'S GOVERNOR ORR: THE GLOBAL ECONOMY HAS BEEN IMPACTED BY SIGNIFICANT SHOCKS. tweet at 2:16pm: RBNZ'S ORR SAYS WE ARE OFFICIALLY CONTRACTIONARY WITH POLICYOrr: Opening remarks to Finance and Expenditure Committee (FEC) It is good to be with you this morning to present our November Monetary Policy Statement. I’m joined by Assistant Governor/General Manager of Economics, Financial Markets and Banking, Karen Silk, and our Chief Economist Paul Conway, and I acknowledge our other Monetary Policy Committee (MPC) colleagues some of whom are with us today or watching online. Today we are here to outline our most recent Monetary Policy Statement and the reasoning for our OCR decision. To provide the best context possible for the Committee’s decision I will refer briefly to the Reserve Bank’s recently published Review of our monetary policy actions over the five years ended September 2022.1 The Review — undertaken in conjunction with the Board of Te P?tea Matua and peer reviewed by two independent international experts — is a legislative requirement. It is also a timely requirement from the Committee’s perspective. Over the period reviewed, the global and New Zealand economy has experienced historically significant economic shocks, in large part due to the COVID-19 pandemic and exacerbated by Russia’s invasion of Ukraine. Policymakers, including the Reserve Bank’s Monetary Policy Com

Good evening. I’m pleased to be here with Senior Deputy Governor Carolyn Rogers to discuss our recent policy announcement and the Bank of Canada’s Monetary Policy Report (MPR). In October, we raised the policy interest rate by 50 basis points to 3.75%. This is the sixth consecutive increase since March. We also expect our policy rate will need to rise further. How much further will depend on how monetary policy is working to slow demand, how supply challenges are resolving and how inflation and inflation expectations are responding to this tightening cycle. Our decision reflected several considerations. First, inflation in Canada remains high and broad-based, reflecting large increases in both goods and services prices. Inflation has come down in recent months, but we have yet to see a generalized decline in price pressures. Second, and related, the economy is still in excess demand—it’s overheated. Job vacancies have declined from their peak but remain high, and businesses continue to report widespread labour shortages. Third, higher interest rates are beginning to weigh on growth. This is increasingly evident in interest-rate-sensitive parts of the economy, like housing and spending on big-ticket items. But the effects of higher rates will take time to spread through the economy. Fourth, there are no easy outs to restoring price stability. We need the economy to slow down to rebalance demand and supply and relieve price pressures. We expect growth will stall in the next few quarters—in other words, growth will be close to zero. But once we get through this slowdown, growth will pick up, our economy will grow solidly, and the benefits of low and predictable inflation will be restored. To put this in numbers, growth in gross domestic product (GDP) is projected to decline from about 3¼% this year to just under 1% next year a tweet at 4:32pm: BOC'S GOV. MACKLEM: WE ANTICIPATE THAT OUR POLICY RATE WILL NEED TO BE RAISED FURTHER. tweet at 4:32pm: BOC'S GOV. MACKLEM: HOW FAR POLICY RATES MUST RISE DEPENDS ON HOW WELL MONETARY POLICY IS WORKING TO SLOW DEMAND. tweet at 4:33pm: BOC'S GOV. MACKLEM: IN CANADA, INFLATION REMAINS HIGH AND WIDESPREAD, REFLECTING SIGNIFICANT INCREASES IN BOTH GOODS AND SERVICES PRICES. tweet at 4:34pm: BOC'S GOV. MACKLEM: THE CANADIAN ECONOMY IS STILL OVERHEATED AND IN EXCESS DEMAND.