An Inflation Pioneer Is Under Siege
Deteriorating relations between New Zealand's central bank and the government show there's more to independence.
New Zealand’s central bank is considered a big fish when it comes to inflation targeting.
Photographer: Fairfax Media/Getty Images
Paul Volcker, the legendary former Federal Reserve chair, recognized there was more going on in New Zealand than his beloved trout fishing.
When trade barriers collapsed in the final decades of the 20th century, an export from the tiny country had an outsized impact. New Zealand handed its central bank a formal inflation target, the world's first, and the independence to pursue it. Both became totems of economic doctrine worldwide, mostly for the good. So, a fraying of ties between the government and the Reserve Bank is notable and likely has broad lessons.