In a slightly hawkish turn, monetary policy decisions by the Reserve Bank of New Zealand will return to an inflation-only focus, following the recent election of a centre-right government.
The new law, passed last week, ends the dual-tranche approach adopted under the previous Labour-led coalition which required the central bank to also provide "maximum sustainable employment" when setting interest rates.
"Over time, a single focus on price stability is the best way to achieve strong, consistent growth in employment," explained New Zealand Finance Minister Nicola Willis.
The RBNZ, which became the first central bank to introduce inflation targeting in 1990, will use the revived inflation-only mandate when the Monetary Policy Committee next meets on February 28.
The passage of the new law came a week after Australian Treasurer Jim Chalmers abandoned proposals requiring the Reserve Bank of Australia to give “equal consideration” to full employment and inflation.
The RBNZ has an inflation target range of 1%–3%, while the RBA targets 2%–3% with an aim of 2.5%.
The Federal Reserve has a 2% inflation target as part of its mandate which also includes a maximum employment goal.
The Bank of England targets 2% inflation, while also supporting the government’s growth and employment aims, whereas the European Central Bank's primary objective is to achieve 2% inflation over the medium term.