An independent review finds the Reserve Bank kept stimulus running well past the point the economy needed it
An independent RBNZ Covid review has found the Reserve Bank was too slow to withdraw stimulus after the economy recovered faster than the bank had anticipated.
The review was conducted by MIT Professor Athanasios Orphanides and former Reserve Bank Assistant Governor David Archer. It was released on 22 September 2026 and examined decisions made by the Reserve Bank's Monetary Policy Committee (MPC) from 1 January 2020 to 31 December 2022.
The review found the initial response appropriate. The OCR was cut to 0.25%, large-scale asset purchases (LSAPs) were deployed, and a funding for lending program was introduced. According to the review, those actions helped in stabilising government bond markets and supporting the broader economic recovery.
What the RBNZ Covid review found about stimulus timing
The problem, the review found, was what came next. The economy recovered faster than anticipated, but policy did not adjust. Stronger-than-forecast data was set aside, and the risk of persistent inflation was underestimated.
It took a full year for policy to adjust to the reality that the initial stimulus had already done its job. By then, excess demand had built up. Inflation reached 7.3%, which was 5.3% above target. The unemployment rate fell to 3.2%, which the reviewers called an "unsustainable historic low." Getting inflation back under control required aggressive tightening that increased unemployment and curtailed growth.
The review also found the Reserve Bank was not ready to use the full range of tools when the OCR approached its lower limit. It noted that a negative interest rate policy "was inexplicably not ready for implementation" and that some tools were later "rushed into action with insufficient forethought."
The rapid rise in fixed mortgage rates that followed forced many clients into difficult refix decisions as rates climbed sharply from their pandemic lows.
What the RBNZ Covid review recommends on mandate and decision-making
The review also took issue with the previous government's decision to broaden the Reserve Bank's mandate to include maximum sustainable employment alongside price stability. In the reviewers' words, those amendments "downplayed the importance of price stability" and "effectively mandated that the Bank should tolerate larger and longer lasting inflation deviations from target."
Finance Minister Nicola Willis noted the current government had already restored the bank's single focus on inflation. She also pointed to recent MPC charter changes the reviewers welcomed. These include making members' votes public when there is no consensus and making it easier for members to discuss their views publicly.
Recommendations focus on testing a wider range of scenarios and giving greater weight to real interest rates and near-term data. Additional monetary policy tools should be prepared before they are needed. Willis said she expects the Reserve Bank to report publicly on its response.
Reserve Bank accepts findings
Board Chair Rodger Finlay welcomed the review. Governor Dr Anna Breman said its insights would inform future policy work. "I am proud to lead an institution that learns from the past in order to benefit New Zealanders," she said.
The RBNZ noted it had already acted on lessons from the 2020–2022 period, set out in a Bulletin article published in September 2025.
