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New Zealand Monetary Policy September 2020

New Zealand: RBNZ stays put in September

At its meeting on 23 September, the Reserve Bank of New Zealand (RBNZ) decided to leave the official cash rate (OCR) unchanged at its historic-low level of 0.25%, in line with market expectations. Moreover, it reaffirmed the possibility of bringing the policy rate down to negative territory, among other measures, in order to keep borrowing costs low and provide additional stimulus.

The RBNZ agreed to continue its Large Scale Asset Purchase Programme of up to NZD 100 billion, to further lower retail rates. Moreover, it reaffirmed that additional monetary stimulus may be needed in the form of negative rates, low-cost funding to banks, foreign asset purchases and interest rates swaps, as the country tries to get back on its feet following the severe blow dealt by the pandemic. Risks to the outlook remain firmly tilted to the downside, due the recent resurgence of new Covid-19 cases in Auckland and the future spread of the virus both domestically and globally.

The Bank also discussed how it will sequence its deployment of additional stimulus measures and concluded that, before bringing interest rates to negative territory, it will resort to a Funding for Lending Programme in order to bring credit to the economy at a greater speed.

The next monetary policy meeting is scheduled for 11 November.

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