NZIER’s Shadow Board calls for tightening at the upcoming meeting

The Shadow Board overwhelmingly calls for a tightening in monetary policy at the August Monetary Policy Statement, with many noting an OCR increase would be appropriate. That said, there remained a wide range of views amongst the Shadow Board. Recent developments point to a rise in inflation pressures in the New Zealand economy, reflecting the combination of strengthening demand and COVID-related supply constraints. These constraints include acute labour shortages as border restrictions limit the ability for workers to be brought in and global supply chain disruptions, affecting the ability of businesses to source inventory. Robust demand is allowing businesses to pass on higher costs more easily to customers by raising prices, suggesting inflation pressures will persist in the New Zealand economy.