Easy monetary policy is the wrong tool to use to try and close an output gap, according to John McDermott, assistant governor at the Reserve Bank of New Zealand, who told the Wellington Chamber of Commerce yesterday such attempts could be counterproductive.

Targeting higher inflation "in pursuit of better output growth over the longer-term" risks "unanchoring inflation expectations" and causing "higher and more variable inflation", which can harm long-term growth, he said.

Sticking to an