Richard Prebble: We need to restore low inflation as the Reserve Bank’s sole remit

The Reserve Bank’s .5% increase in interest rates will have little impact on inflation. Inflation is over 7%. The real interest rate gap between the OCR and inflation is possibly 6%. A half a per cent rise is not going to reduce baked in inflationary expectations.

The half a per cent rise is an attempt to restore the Bank’s shattered reputation. The Bank’s wildly optimistic forecasts and its compromised independence have fatally damaged the Bank’s credibility.

Prior to the last election the bank sought and received an independence compromising taxpayer guarantee from the Finance Minister. Grant Robertson agreed to cover any losses from the bank continuing to print a billion dollars a week.