Jones, of Wigram Capital, says the RBNZ needs to prioritise decreasing the supply of money, rather than just focussing on increasing the cost of money (by hiking interest rates), to curb inflation. Speaking to the Herald, Jones said the RBNZ urgently needs to reduce the amount of bank deposits it holds. It would also save taxpayers money, as the RBNZ needs to pay banks interest on the $47b of deposits they currently have with the central bank. Jones believes this arrangement is avoidable and doesn't help reduce the supply of money in the financial system quickly. Again, he stressed tightening monetary conditions by shrinking the supply of money, might enable the RBNZ to increase the cost of money less aggressively.

Source: New Zealand Herald June 13, 2022 04:56 UTC