Can’t deliver two objectives with one instrument

 Quote of the day from Don Brash:

. . . The Reserve Bank has got only one instrument, and that’s monetary policy. You can’t deliver two objectives with one instrument, and David Parker at least should have the brains to know that. Apparently not.

He was responding to comments from Winston Peters and Parker who are both trying to get the Reserve Bank to control both inflation and the exchange rate.

The high exchange rate against the US dollar, pound and euro is making business harder for exporters but that is far more a reflection on their weaknesses than our strength.

But the exchange rate with Australia isn’t too bad and that’s our major trading partner.

Exports would be earning more if our dollar was lower but imports would cost more too.

That wouldn’t just mean luxuries but also necessities like fuel, machinery and medicines.

And a high dollar is far better than high inflation or any of the other consequences of tinkering by politicians.

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