RBNZ: Stance expected to remain accommodative – UOB
|Lee Sue Ann, Economist at UOB Group, sees the RBNZ clinging to its loose stance when comes to monetary conditions.
Key Quotes
“At its latest monetary policy, the Reserve Bank of New Zealand (RBNZ) decided to expand its quantitative easing (QE) program. The central bank increased its Large Scale Asset Programme (LSAP) to as much as NZD100bn from NZD60bn, and extended it until June 2022. The official cash rate (OCR) remained at the record-low of 0.25%, but the RBNZ said it is open to cutting interest rates further, including taking them negative.”
“Today’s decision to expand QE was in line with our expectations, except that we were expecting QE to be expanded to a cap of NZD90bn… In fact, the case for further significant monetary easing is clear, as inflation is set to tumble and unemployment climbing higher.”
“The RBNZ will want to keep its options open. In this regard, a negative OCR and foreign asset purchases will remain options on the table. On the former, we recognize how this will have a negative impact on bank margins. For now, we do not see any cuts to the OCR for the remainder of the year. On QE, we currently think a NZGB-centric programme will remain the main monetary policy tool, but the RBNZ may consider expanding the programme to include other assets (including foreign assets). This could help cap excessive gains in the New Zealand dollar.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.