On government instruction the will now have to consider not only its old target when setting interest rates, but also the “maximum, sustainable” level of employment. This addition was proposed by the incoming government which was formed last year following considerable coalition horse trading when September’s election produced a hung parliament. Reports in the interim suggested that the RBNZ might have liked Auckland to stop short of making the mandate official, but the government has always held firm and said that whoever became the new RBNZ government would have to accept it. Well, now Adrian Orr is installed as that governor and has indeed accepted it.
What this may mean is that interest rates remain lower than they might otherwise have done as the second part of the mandate inclines the RBNZ to wait before raising interest rates to secure the first part. With NZ interest rates already at record lows, docile and import levels below expectations, the dual mandate is likely to weigh on NZD/USD .
The pair is already looking a little week on its daily technical charts, having been in a steady, well respected downtrend since February.