Bollard: taking the foot off the accelerator

"New Zealand has been fortunate in some respects, allowing most of our crisis liquidity and guarantee measures to be terminated.  Conventional monetary policy will now guide the stages of recovery," says Dr Bollard.

In the Official Cash Rate Review last week the Reserve Bank (RB) noted: '...we expect to begin removing policy stimulus over the coming months, provided the economy continues to evolve as projected.'

Dr Bollard says the RB used the words 'begin removing stimulus' deliberately as the official cash rate is at an historically low level of 2.5% and it is clearly in a very stimulative position. 

"Using a truck driver analogy, our foot is strongly on the accelerator.  Over coming months we expect to reduce the pressure on this pedal, but in effect to keep some throttle going.