© Bloomberg. The Reserve Bank of New Zealand (RBNZ) building stands in Wellington, New Zealand, on Saturday, June 22, 2019. The out-of-favor kiwi dollar has tumbled about 3% this quarter as the Reserve Bank of New Zealand turned dovish and cut interest rates, the first central bank in the developed world to do so. Economic growth held at a five-year low in the three-months through March, leaving the door open for further easing.
(Bloomberg) — New Zealand’s central bank maintained the size of its quantitative easing program and kept interest rates at a record low, and said it is making progress on additional tools including negative rates to use if more stimulus is required.
“Monetary policy will need to provide significant economic support for a long time to come to meet the inflation and employment remit,” the Reserve Bank said Wednesday in Wellington after holding the official cash rate at 0.25% and keeping its Large Scale Asset Purchase program at NZ$100 billion ($66 billion). The Monetary Policy Committee is “prepared to provide additional stimulus,” it said.
New Zealand’s recovery from its worst economic contraction since the Great Depression is being hampered by a second coronavirus outbreak in largest city Auckland, and the jobless rate is expected to rise as the nation’s closed border cripples the key tourism industry. RBNZ officials are developing a stimulus package combining a negative cash rate and wholesale bank funding that will give the monetary policy committee options if its inflation and employment targets remain under pressure.
The bank said today that a funding for lending facility will be “ready before the end of this calendar year” and that tools could be deployed independently.
Economists expect the RBNZ to outline its stimulus plans at the next Monetary Policy Statement on Nov. 11, when it will publish fresh forecasts for the economy and the cash rate. The central bank reiterated guidance today that it intends hold the OCR at 0.25% until at least March.
The New Zealand dollar rose on the statement. It bought 66.28 U.S. cents at 2:10 p.m. in Wellington. Short-dated New Zealand bond yields have already turned negative as investors ramp up bets that the RBNZ will cut rates next year.
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