WELLINGTON, Sept. 22 (Xinhua) -- New Zealand's Reserve Bank was too slow to withdraw monetary policy stimulus after the economy recovered more strongly than expected from the COVID-19 pandemic, according to an independent review released Tuesday.
The review, released by Finance Minister Nicola Willis, examined monetary policy decisions from Jan. 1, 2020, to Dec. 31, 2022, and found the central bank's initial response to the pandemic was appropriate and effective, but monetary policy stimulus remained in place too long.
The review, conducted by Massachusetts Institute of Technology Professor Athanasios Orphanides in the United States and former Reserve Bank of New Zealand Assistant Governor David Archer, was to identify lessons that could be learned to improve the response to future economic shocks, according to a government statement.
The prolonged stimulus, on top of an already overheating economy, contributed to a costly boom-bust cycle, Willis said in the statement.
Inflation reached 7.3 percent and unemployment fell to what the reviewers described as an "unsustainable historic low," while getting inflation back under control required substantial monetary policy tightening that increased unemployment and curtailed growth, Willis said.
"The COVID-19 pandemic constituted an unprecedented economic shock. It has taught New Zealand some painful lessons," she added. The review's recommendations focus on strengthening monetary policy decision-making under uncertainty.
Reserve Bank Governor Anna Breman said officials would carefully analyze the review report and use its insights to help inform future practice. ■
