Inflation went up to 2.5% in the March quarter, its highest rate since 2011. This was a fair amount above expectations, with the RBNZ expecting a 2.2% rate. They were not alone with private sector forecasters also expecting weaker inflation outcomes.
This raised two questions from me:
- Is this evidence that COVID was a supply shock more than a demand shock?
- And does it mean that monetary policy should respond?
I want to think about the later point in this post – as the first question will get answered as we work through it.Read more