By Lucy Craymer and Renju Jose
WELLINGTON (Reuters) - Higher tariffs and uncertainty about global trade policy could result in weaker-than-expected economic activity worldwide and at home, a top New Zealand central banker said on Tuesday.
"At this stage, the likely impacts on inflation in New Zealand are more ambiguous, but the balance of risks has shifted to the downside," Reserve Bank of New Zealand Chief Economist Paul Conway said in a speech.
He added that there were downside risks to growth and inflation, but, as mentioned in the central bank’s April monetary policy meeting, there was scope to lower interest rates if necessary depending on how things play out.
Since the U.S. imposed on-off sweeping import tariffs at the start of April, global markets have been rocked by volatility, while policymakers have been grappling with heightened recession risks.
"It’s not easy. I think a lot of people globally are struggling with these changes," Conway said, adding the bank was doing work to further their understanding of the impact of different types of uncertainty.
Conway also announced the central bank would be launching KiwiGDP, a live nowcast of New Zealand’s GDP growth in the current quarter.
"KiwiGDP is a dynamic factor model a lot like one published by the Federal Reserve Bank of New York," Conway said. It will use a broad range of economic indicators and be updated weekly.
Official New Zealand GDP data is released only quarterly and has been subject to significant revisions in the last year making it more difficult for bankers to correctly forecast the outlook for the country’s economy.