Reserve Bank governor Alan Bollard retains the confidence of Finance Minister Michael Cullen despite inflation likely to remain above 3% for a considerable time.
Dr Bollard's primary role is to keep inflation within the 1% to 3% band, preferably at the mid-point of 2%.
On Tuesday, Statistics New Zealand data showed inflation as measured by the consumers price index (CPI) was 4% for the year ended June.
Most economists are now picking inflation to rise to 5% in September, with Westpac economists forecasting inflation to be 5.5% by the third quarter.
The Otago Daily Times emailed questions to Dr Cullen, National Party finance spokesman Bill English and Revenue Minister Peter Dunne asking whether they would consider changing the 1% to 3% target, given inflation was likely to remain above 3% until 2010.
The three men were also asked whether they would consider censuring the central bank for failing to keep inflation within the target or would they sack Dr Bollard and replace him with someone they thought could do the job.
Dr Cullen and Mr Dunne replied but there was no response from Mr English, despite officials sending out emails through the day under his name.
Dr Cullen said he had confidence in Dr Bollard and his implementation of the policy targets agreement.
There were no changes to the agreement under consideration.
"It is important to point out that inflation is being driven by global factors - especially the dramatic global increases in the price of petrol and food."
Without the increase in petrol, inflation would be back within the 1% to 3% range.
New Zealand's inflation was also in line with several of the country's major trading partners who were also struggling to meet their targets, Dr Cullen said.
Inflation in Australia was 4.2%, in the UK it was 3.8, 4.9% in South Korea and 4% in the Eurozone.
Mr Dunne, also the leader of United Future, said he would not consider changing the target.
"Even though inflation is above the target band, I think it is important to retain it both for its purpose and aspirational value. It is still the most desirable inflation range."
He did not think it necessary to censure the Reserve Bank given that external factors such as fuel and commodity prices were having such a large impact on inflation.
Nor would he sack Dr Bollard.
Bank of New Zealand senior economist Craig Ebert said from Wellington that having inflation at 4% was a bad look for someone charged with keeping inflation low and being paid a large amount of money for doing so.
"There are two things that are really important, not an excuse, but still important. And if you sacked Bollard for having high inflation then you would be sacking every central bank governor."
The first point was that commodity inflation was surging in a way not seen since the 1970s and there was nothing any central bank could do about it.
Secondly, stripping out the higher food and petrol costs showed inflation still testing the top of the 3% band but demand was slowing and it appeared as though the Reserve Bank of New Zealand was winning that particular battle, he said.
The next challenge for the central bank was stop the perception that big wage claims were needed to counter rising prices or that price increases should be made, whether they were justified or not.
Both those things would only fuel inflation, Mr Ebert said.
"Looking ahead, some form of recession, or things going off, should take a lot of steam out of the CPI."
The commodity boom should slow down under its own and prices should flatten or even crash.
"Once that happens, we might get CPI turning negative as soon as next year."
Changing the policy target agreement would be a mistake as it would give the impression New Zealand wanted inflation to stay in the system, he said.
Signs were emerging that a cut in the official cash rate (OCR) by the Reserve Bank next Thursday might not be passed on to mortgage borrowers.
Wholesale interest rates have risen internationally in recent weeks and had not yet been passed on to borrowers, Mr Ebert said.
"People are oblivious to all of this. There will be a lot of disappointment when the OCR is cut and mortgage rates don't fall, and in some case, go up."
Banks cut fixed mortgage rates in early June after the Reserve Bank said it was likely to cut rates later this year, hoping that the worst of the global credit crunch was over.
The credit crunch has returned with a vengeance in recent weeks and global rates are rising again.
Banks have borrowed heavily offshore in the last five years to fund New Zealand's housing and mortgage debt boom and they are heavily reliant on international interest rates.
New Zealand banks owe about $NZ61 billion to foreign investors that has to be rolled over every 90 days.
