Thus, the Reserve Bank cannot afford to be, in the words of Bank of England Governor Eddie George, “Inflation nutters”. We are not permitted to cure the patient by killing it. Let me explain how flexible monetary policy avoids such a result.
By its nature, the New Zealand economy is often hit by economic disturbances - for example, changing conditions in the world economy, El Nino and La Nina periods in the weather and fluctuations in the number of people moving to and from New Zealand. All these things can have major impacts on the New Zealand business cycle.