Tariffs may lower medium-term inflation risks, curb spending, says New Zealand central banker
As countries redirect exports away from the United States, falling import prices may help lower domestic inflation, Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway said in a speech at Business New Zealand.
"There's a whole lot of 'wait and see' going on out there right now," Conway said.
Conway said the central bank, as outlined in the monetary policy review in July, continues to see scope to lower the interest rates further if medium-term inflation pressures ease as projected.
New Zealand's central bank held the benchmark interest rate at 3.25% this month, the first pause since it started cutting rates in August 2024, citing near-term inflation risks.
Conway said the New Zealand economy is currently supported by high export prices and lower interest rates though "as a small, open economy," the country would still be significantly impacted by global economic developments.
"Being tied in with the global economy helps us prosper. It also means that when something big happens offshore, such as the imposition of tariffs, its ripple effects impact the New Zealand economy," Conway said.
In April, U.S. President Donald Trump placed a 10% baseline tariff on several countries, including New Zealand.
Early data suggests New Zealand's economic growth has slowed in the June quarter, Conway added, adding that tariffs could increase inflation pressures in the United States, but New Zealand may face weaker global growth that reduces demand for its exports.
"On net, these developments are expected to slow New Zealand's economic recovery over mid-2026," he said.
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