In 2011 I did a post titled “Bad John” when John Key merely said:
Well that’s a matter for the Reserve Bank Governor, and it’s for him to decide and him alone to decide what happens on Thursday but certainly the markets have factored in a likely cut in the official cash rate, and you’ve gotta say lower interest rates probably help the country, but that ultimately is a matter for the Governor
Reserve Bank Governors know that politicians generally want cuts in the cash rate because it helps economic growth. And that is exactly why the Reserve Bank is independent.
Just as I thought John Key shouldn’t say publicly what he thinks the Reserve Bank should do, the same goes for Christopher Luxon who revealed he shares his views directly with the Governor. I trust Governors to put their obligation to keep inflation under 3% ahead of views of politicians, but a big part of the ability of a central bank to get inflation down is if markets believe they will increase the cash rate to dampen inflation, no matter how unpopular it might be.
Of course the comments by Key 14 years and Luxon are minor infringements of best practice compared to Donald Trump who not just demands loudly that the Federal Reserve lower interest rates, but tries to sack members of the Federal Reserve who vote the wrong way.
David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders
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