The governor of New Zealand’s central bank stepped down unexpectedly on Wednesday, concluding a seven-year term that had its share of controversies following elevated interest rates that plunged the nation into its deepest recession since 1991.
No explanations were provided for the abrupt resignation of Adrian Orr, the head of the Reserve Bank of New Zealand, whose term will now conclude three years earlier, on March 31.
“I exit the position with consumer price inflation within target, and an economy in a cyclical recovery after the extensive COVID-related disruptions. The financial system remains robust,” Orr stated in a release.
The current government, led by National Party Prime Minister Christopher Luxon, was critical of Orr’s management during its time in opposition, attributing the sharp inflation increase post-pandemic and subsequently high interest rates that caused the recession to him.
Finance Minister Nicola Willis informed the media that she had been aware for a few days of discussions occurring between Orr and the RBNZ board regarding his departure, but did not provide a reason for it.
Deputy Governor Christian Hawkesby will assume the role of acting governor until March 31, when Willis will appoint an interim governor for a period of up to six months on the board’s recommendation while they search for a permanent successor.
Orr will be on leave until his official end date in March.
“I’m shocked by the abrupt resignation of the RBNZ Governor,” expressed Brad Olsen, Principal Economist at Infometrics.
“There are more questions than answers…,” he remarked.
“The presence of an Acting Governor while the sitting Governor is still in place until March 31 adds to the prevailing confusion and questions.”
UNWAVERING CRITICISM
This announcement coincides with the RBNZ hosting an international gathering of central bankers and scholars to commemorate 35 years of its successful adoption of inflation targeting as a key part of monetary policy.
During a news conference later that day, Reserve Bank Board Chair Neil Quigley noted that Orr would not be attending the conference.
“You must understand that being the Reserve Bank governor involves facing constant critique of your decisions,” Quigley conveyed to reporters.
Orr was reappointed as the governor of the central bank for another five years in March 2023, shortly before the National Party gained power, a decision met with some disapproval from Luxon and Willis.
While Orr led an extensive stimulus initiative to help the nation recover from the economic fallout of the pandemic, this ultimately contributed to a troubling surge in inflation.
In response, the RBNZ aggressively hiked interest rates from a record low of 0.25% to a staggering 5.50%, which led to a recession in the previous year.
This marked New Zealand’s most severe economic decline since 1991, aside from the pandemic, which analysts attribute to a mix of low productivity and various policy errors, often based on unreliable data.
At the bank’s most recent monetary policy meeting on February 19, Orr displayed no indication of resigning while he announced a half-point reduction in interest rates to 3.5%.
He also indicated further reductions of a quarter point in April and May, which financial markets were still fully anticipating. The local currency reacted minimally, only slightly decreasing to $0.5652.
Central bankers have experienced heightened scrutiny in recent years due to pandemic policies and the rising cost of living.
The leader of Australia’s neighboring central bank faced an early end to his 43-year tenure amid perceived errors during the pandemic.
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