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New Zealand Monetary Policy May 2020

New Zealand: RBNZ ramps up asset purchasing program in May

On 13 May, the Reserve Bank of New Zealand (RBNZ) decided to further ramp up its asset purchasing program in order to reduce borrowing costs and soften the economic impact from Covid-19. At the same time, the Bank decided to leave the Official Cash Rate (OCR) unchanged at its historic-low level of 0.25%.

The RBNZ expanded the size of its Large-Scale Asset Purchase program (LSAP) from NZD 33 billion to NZD 60 billion, also adding government inflation-indexed bonds to the assets covered by the program. The Bank decided to expand the program to continue lowering borrowing costs in the funding market, and opted to frontload the additional stimulus in order to prevent possible liquidity strains ahead.

The Bank stands ready to use additional monetary policy tools if needed, such as further cuts to the OCR or the inclusion of other types of assets to its LSAP.

The next monetary policy meeting is scheduled for 24 June.

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