The greater focus on employment a shift for the RBNZ

Incoming Reserve Bank of New Zealand governor Adrian Orr steered clear of suggestions he would be soft on inflation even as he signed a new policy deal with the government to include the goal of "maximising sustainable employment".

The new mandate, which takes away the governor's sole power on interest rate moves and gives it to a monetary policy committee with increased transparency on decision-making, retains the 1-3 percent inflation goal, with a focus on keeping price growth near the 2 percent mid-point.

The greater focus on employment, marks, however, a shift for the RBNZ, which in 1989 was the first central bank to adopt an official inflation target, and fulfils the new Labour-led government's campaign promise to promote job creation.

But analysts say the new mandate is unlikely to change the bias of near-term monetary policy, with the RBNZ widely expected to keep interest rates at a record low of 1.75 percent at least until the end of the year.

Orr gave the same message, saying the RBNZ has long considered employment in its decision-making, and that the new deal would only make it more explicit and transparent.

"These are fairly orthodox words for an incoming Reserve Bank Governor," Dominick Stephens, chief economist at Westpac, said in a note. "There was no suggestion that Mr. Orr would be softer on inflation than his predecessors."

The New Zealand dollar was little changed at $0.7244, following the announcement.