Treasury sees targets

Press, 7 September 1989, Page 23

Treasury sees targets

Wellington reporter

Monetary policy should eventually be pegged to one or a limited set of intermediate targets, the Treasury says in answers to the Opposition in the finance and expenditure select committee hearings on the Treasury estimates. The Opposition spokeswoman on finance, Miss Ruth Richardson, asked what likelihood there was for moving from the current “checklist” approach to monetary policy towards “greater reliance on a nominal ‘anchor’.” At this stage, there did not appear to be a single measure to use as a satisfactory anchor, the Treasury said.

Evidence so far was that indicators such as credit aggregates and nominal exchange rate movements were insufficient on their own to allow judgments about monetary policy. “However, we expect that monetary policy’s ability to signal a nonaccommodating, disinflationary stance will continue to improve as a more stable economic environment emerges,” the Treasury said. “It is expected that at some point a more explicit move towards adopting one or a limited set of intermediate targets for policy, consistent with medium-term price stability, will be possible.”