WELLINGTON, New Zealand (AP) — New Zealand’s central bank said Monday it will consider employment as well as inflation when setting interest rates and making other monetary policy decisions.
The Reserve Bank has aimed to keep inflation under control at about 2 percent. Now the bank will also aim to maximize sustainable employment. The dual mandate is similar to the mandates of the U.S. Federal Reserve and some other central banks.
The change takes effect Tuesday as part of an agreement when incoming Reserve Bank Governor Adrian Orr begins his five-year term. The government hopes to later enshrine the change in law.
The government plans to make other changes including adding a seven-member committee to make monetary policy decisions. Those decisions are currently made solely by the central bank governor.
The new mandate does not come with a specific target for the unemployment rate.
Orr told reporters that employment had always been a consideration for the bank and that the new agreement made it more transparent.
“It’s something that every New Zealander should hope for, that we are gainfully employed, at our maximum level,” he said. “But that is really a function of so many different factors going on in the economy, both some within our control, and some outside.”
Finance Minister Grant Robertson said that under the planned new decision-making committee structure, a majority of members would be Reserve Bank staff and a minority would be external members. He said the bank’s governor would chair the committee and that Treasury would have a non-voting observer.
“I want to say clearly again, that above all, the Reserve Bank will retain its operation independence, which we have come to value in new Zealand,” Robertson said.
New Zealand’s benchmark interest rate is currently set at 1.75 percent. Inflation is running at 1.6 percent and the unemployment rate is 4.5 percent.