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New RB committee reduces risk of “feral” governor

Reserve Bank governor Adrian Orr says the new “remit” for the monetary policy committee that will replace the governor as the central bank’s sole decision maker will reduce “the risk of a governor going feral”.

This morning, Orr and Finance Minister Grant Robertson signed the new remit, which comes into effect from April 1 and will govern the writing of the next monetary policy statement due on May 8.

It is essentially unchanged from the Policy Targets Agreement Orr and Robertson signed when Orr took office last year that requires the bank to aim to keep inflation at about 2 percent and to try to ensure maximum sustainable employment.

The pair also signed the charter that will govern the conduct of the new committee in accordance with the Reserve Bank of New Zealand (Monetary Policy) Amendment Act passed last year.

Four members of the new committee will be Reserve Bank staff with the governor as chair and Robertson says he will announce the appointments of three external members next month.

While the governor will be the sole spokesperson when decisions are formally announced, other members may publicly express their views on the balance of risks and the economic outlook as long as they consult the rest of the committee beforehand.

Robertson said changing the decision-making structure “wasn’t about a lack of confidence in the decisions that were being made” but formalises a process the central bank had already been operating informally and making it more transparent.

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