The Reserve Bank meets three times a year to set interest rates without seeing updated inflation data at its monetary policy reviews

It’s an odd quirk of New Zealand’s central bank calendar that, three times a year, policymakers set interest rates just days or weeks before new inflation data is released.

This has frustrated some observers, who argue the Reserve Bank (RBNZ) should schedule its Monetary Policy Reviews (MPR) after the release of Consumers Price Index (CPI) data.

Measuring the changing price of a fixed basket of goods and services bought by New Zealand households, the CPI is used by the RBNZ for its inflation targeting. Statistics NZ also issues the household living-costs price indexes, which unlike the CPI, include interest payments.

All three RBNZ MPRs last year, as opposed to when it issues full Monetary Policy Statements (MPSs), were held one week before Stats NZ published new CPI data. This year, the meetings are scheduled between seven and 12 days before the release.

The timing wasn’t necessarily seen as a problem when inflation was stable, but it became awkward as prices began rising quickly and unpredictably in recent years.

Economist and commentator Michael Reddell described the schedule as “madness” in a blog ahead of the April review and has called for better alignment since at least 2022.

Easier said than done?

But that may be easier said than done. Stats NZ allows itself just 15 working days after each quarter ends to finalise and release CPI data.

“Some of the data that feeds into the CPI is only made available to us the week following the end of the quarter, so it is a tight turnaround,” a spokesperson said in an email. 

All the data must be collected, compiled, analysed, and quality-checked. Tables, press releases, and key facts also need to be prepared for publication.

“In terms of aligning with Reserve Bank announcements, our timings are scheduled based on the factors outlined above, and the delivery of the CPI is independent of monetary policy decision making,” they said.

The central bank could potentially delay its policy reviews by a week or two, but doing so would compress the time available to prepare a MPS.

The RBNZ said it prioritises having the necessary data for these more-detailed MPS meetings, where its monetary policy strategy is set out with forecasts and fuller analysis.

At MPR meetings, inflation and labour market data are typically 10 to 12 weeks old, and six to nine weeks old at MPS meetings. Gross Domestic Product, which takes longer for Stats NZ to produce, can be anywhere from 13 to 19 weeks old at either meeting.

An RBNZ spokesperson said the central bank considers all economic data and there will always be an upcoming release, regardless of when meetings are scheduled.

“MPS releases are usually about a month after CPI releases, which allows time for RBNZ to conduct surveys on inflation expectations which are key inputs to MPS decisions,” they said. 

Since monetary policy operates with “long and variable lags,” the assessment of medium-term inflation pressure matters most, and shifting meetings by a week or two would make only a “marginal economic difference.”

The central bank also has accurate forecasts of upcoming inflation figures, especially now Stats NZ publishes monthly selected price indices (SPI) covering about 45% of the CPI basket.

RBNZ wants more

Then-Statistics Minister Andrew Bayly described this selected inflation data as "a cost-effective alternative solution to a monthly Consumer Price Index."

In a briefing to Bayly, received by incoming ministers after the new Government was formed, Stats NZ said it lacked the funding to update the CPI basket to ensure it fully reflected the goods and services New Zealand households were purchasing.

And despite the introduction of the SPI, the RBNZ reiterated last year that it still wants more frequent data. It noted New Zealand is one of the few developed countries that doesn’t produce a monthly CPI, and reviews its CPI weights less often than most. The RBNZ has wanted a monthly CPI since at least 2013.

"While the SPI is not intended to be a perfect measure of the CPI, it is a step in the right direction and gets New Zealand closer to the global standard. Overall, the SPI has increased the frequency of available information on consumer prices and gives forecasters an additional set of data to indicate the size and direction of changes in inflation components in a timelier manner. The Reserve Bank encourages Stats NZ to continue improving the frequency at which prices are reported in the New Zealand economy," the RBNZ has said.

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