Our monetary policy research is guided by our Monetary Policy Remit and centres around 6 broad research themes below:
- Inflation
- Forecasting and modelling
- Tools, transmission and communication
- Small open economy macroeconomics
- Labour market
- Monetary policy framework, strategy and coordination
A large part of our 2025-26 research agenda has been shaped by the recent post-COVID period of high inflation, and seeks to better understand the role of supply shocks and inflation expectations in driving inflation outcomes as well as how monetary policy transmits through the economy. Increasing geopolitical risks and trade restrictions are reshaping the global macroeconomic environment and highlight the need for more research investigating how uncertainty and tariffs affect the New Zealand economy. Using macroeconomic structural modelling to explore what optimal monetary policy looks like in a world with increasing external supply shocks will help inform our 2028 Remit Review. The topics highlighted below are not exhaustive, and the research being undertaken at the RBNZ extends beyond the projects listed here.
See profiles of our Economics Directorate staff to find out our economists’ research interests.
We research the dynamics of various measures of inflation and inflation expectations, the demand-side and supply-side drivers of inflation, the impact of inflation on the economic and financial wellbeing of New Zealanders, and what drives inflation in the long run. Understanding the dynamics of inflation is crucial to achieving our mandate of price stability, and we are constantly upgrading our models and data-sources to ensure that we are relying on timely and accurate information. The recent post-COVID experience with high inflation has also motivated more research to better understand how pricing behaviour and expectations differ in high-inflation versus low-inflation regimes.
Selected areas of focus for 2025-26:
- Examining how household and firm inflation expectations feed into price- and wage-setting, and the role of heterogeneity in expectations.
- Exploring alternative data sources and measures of core inflation.
- Assessing the role of domestic and foreign demand shocks and supply shocks in driving inflation in New Zealand.
Our monetary policy needs to be informed by best practice forecasting, empirical tools, and quantitative models. Monetary policy affects the economy with long and variable lags, with recent estimates suggesting it takes 18 months to about 2 years for the official cash rate (OCR) to have its peak impact on inflation (see November 2023 MPS, Chapter 4). Policymakers thus need to be forward-looking and base their decisions on an outlook of the future that is highly uncertain. To inform our policy decisions, we rely heavily on economic forecasts constructed using various empirical and structural models that incorporate the latest data (Richardson and Williams, 2025). These models enable us to capture a complex set of information in formulating economic projections and provide a framework for assessing the impacts and trade-offs associated with different policy options. Continuously developing and improving our forecasting and modelling tools is an important dimension of our ongoing research.
Selected areas of focus for 2025-26:
- Refining models of New Zealand house prices.
- Developing models to examine the macroeconomic impacts of climate change.
- Developing measures to capture changes in financial conditions and capacity pressures in the economy.
- Exploring the drivers of productivity across sectors to help forecast potential output growth.
Responding appropriately to evolving economic conditions requires an understanding of the mechanism through which monetary policy affects the economy and financial markets. We are continuously undertaking research to better understand these channels and the factors that may influence the speed or strength of monetary policy transmission. Research this year will continue to better understand the drivers of neutral interest rates, and will also examine housing wealth effects, how business investment decisions respond to monetary policy, and whether there are non-linearities in the transmission of monetary policy.
Selected areas of focus for 2025-26:
- Understanding monetary policy affects different variables and whether there are non-linearities in the transmission mechanism.
- Developing new models to refine our estimates of New Zealand’s neutral interest rate, the rate at which monetary policy is neither stimulatory nor restrictive.
- Exploring how household indebtedness affects housing wealth effects and monetary policy transmission.
We research New Zealand’s role in the global economy, drawing comparisons of economic conditions and monetary policy with other countries, and building our understanding of how global events – such as wars and geopolitical change – may impact the New Zealand economy. As a small open economy, our trade and migration flows are an important driver of growth, and we are susceptible to external shocks. In particular, increases in global tariffs and trade restrictions since April 2025 are reshaping the world economy, with implications for New Zealand’s trade, exchange rates, productivity, and inflation. Research will focus on better understanding how uncertainty, higher tariffs and other supply shocks like climate change affect inflation.
Selected areas of focus for 2025-26:
- Estimating the impact of supply shocks on inflation and output
- Modelling the impact of trade tariffs and uncertainty on the New Zealand economy
- Assessing the macroeconomic impacts of migration on New Zealand using empirical and microdata approaches.
Understanding employment and wage dynamics and their effect on inflationary pressures is key to achieving our inflation mandate. We are continuously pursuing research to enhance our ability to assess labour market conditions and their implications for inflation, including how migration and technological advances such as AI affect New Zealand’s labour markets. Research this year will also focus on how monetary policy affects employment in different sectors.
Selected areas of focus for 2025-26:
- Assessing the potential impacts of automation and artificial intelligence on New Zealand’s labour market.
- Using microdata to explore the role of job mobility and job search behaviour in wage growth and productivity.
- Understanding how monetary policy transmission works through sectoral employment flows.
We are continuously undertaking research and analysis to evaluate the appropriateness of our monetary policy framework and targets and the costs and benefits of different monetary policy strategies under varying economic conditions. This research will help us better prepare for issues that will affect monetary policy in the future. Research into monetary policy frameworks, strategy and coordination allows us to continuously refine our policy frameworks, analysis, and actions to support effective monetary policy decisions. Research beginning this year to inform our 2028 Remit Review will explore how a world with increasing supply shocks affects optimal monetary policy, to evaluate whether our current framework remains appropriate for the future.
Selected areas of focus for 2025-26:
- Using model simulations to evaluate optimal inflation targeting with supply shocks.
- Exploring the interaction between monetary policy and fiscal policy.
- The Optimal Level of the Inflation Target (PDF, 1.15MB)
- The Measurement of Price Stability (PDF, 1.1MB)
- The 2022/2023 Remit Review