The Committee agreed that weak global economic conditions could see imported inflation remain low if global growth slows further or if commodity prices decline. The members discussed the range of appropriate policy responses should imported inflation persist at low levels.
The Committee welcomed the recent employment and wage data but noted that private sector wage growth was subdued despite businesses having difficulty finding labour. The members discussed that the recent slowdown in growth could dampen wage inflation by more than assumed. Some noted that if cost pressures remain elevated, firms may pass on costs to consumer prices by more than assumed, while others viewed the wage pass through as a natural consequence of a tight labour market and policy stimulus.
The members discussed the recent slower domestic GDP growth and the impact of slowing global demand on New Zealand through the trade, financial and confidence channels. The members noted that heightened global uncertainty was reducing investment and suppressing trading-partner growth. This highlighted the risk of a larger or more prolonged slowdown in global economic growth.
The Committee noted that additional stimulus from central banks had underpinned growth and reduced the likelihood of a more-pronounced slowdown. However, some thought that even with support from monetary stimulus, considerable economic and policy uncertainty could see global growth continue to decline. Other members noted that the easing in global financial conditions since the beginning of the year, or a shift in political environment, could lead to a pick-up in global growth over the next year.
The Committee acknowledged the importance of additional spending from households, businesses, and the government, to meet their inflation and employment targets. They also agreed that additional monetary stimulus was needed. The members discussed several important uncertainties.