WELLINGTON, June 26 (Reuters) - New Zealand’s central bank stressed on Tuesday its resolve to make its communication more relevant to the public as Governor Adrian Orr breaks with the complex messaging favoured by many of his counterparts.
Major central banks have struggled to balance the need to maintain transparency and avoid over-committing to future policy shifts. That has compelled them to issue vague, subtle hints on future actions that are hard for the public to understand.
Communication has been particularly challenging when central banks tighten policy, as markets react to any sign of reduced monetary support by pushing up bond yields and dumping stocks.
In a statement outlining its priorities for the next three years, the Reserve Bank of New Zealand (RBNZ) said it will “enhance its communications with stakeholders by taking up opportunities both to listen to them more frequently in depth, and to better explain its decisions and actions”.
“We also intend to place New Zealanders’ understanding of us on a wider footing. We will make our messages more accessible and relevant,” the RBNZ said in its “statement of intent”.
In last year’s statement, the RBNZ said only that it would “communicate broadly on its policies, the reasons for them and the impacts of its activities” through various channels.
Though its economy is only 53rd in the world by size, New Zealand has earned a reputation for economic experimentation and a free market approach in the past three decades. Its inflation targeting strategy soon became global economic orthodoxy.
The RBNZ is set to keep rates on hold this week and signal that no near-term monetary tightening is on the cards, with inflation subdued and global trade frictions clouding the outlook for an already slowing economy.
Markets are on the lookout for any tweak that Governor Orr - who took on the job in March with a pledge to simplify the RBNZ’s messaging - could make in the bank’s policy statement.
Orr brought a fresh tone to the RBNZ’s communications, using colourful illustrations in describing his first rate decision in May to demystify the central bank’s operations.
Tuesday’s statement of intent comes at a time the RBNZ faces some major changes driven by the new Labour-led government, which took the helm in October with a campaign pledge to update the central bank’s mandate.
The changes include an addition of an employment goal to its mandate and an adoption of a monetary policy committee of five to seven members. (Reporting by Leika Kihara Editing by Eric Meijer)