Breaking: Reserve Bank of New Zealand sets official cash rate at 0.25 pct

In a surprise move, instead of meeting on the 25th, the Reserve Bank of New Zealand set its official cash rate at 0.25 pct today in an emergency meeting. 

RBNZ says and key notes

Says negative economic implications of COVID-19 virus continue to rise warranting further monetary stimulus - Reuters News

• Says OCR will remain at this level for at least 12 months.
• Says negative economic implications of COVID-19 virus continue to rise warranting further monetary stimulus.
• Says negative impact on New Zealand economy from global COVID-19 outbreak is, and will continue to be, significant.
• Says New Zealand's financial system remains sound and major financial institutions are well capitalised and liquid.
• says ensuring that banking system continues to function normally.
• Says committee agreed unanimously to keep OCR at 0.25% level for at least 12 months.
• Says committee agreed if further stimulus is required, large scale asset purchase programme of NZ govt bonds preferable to further OCR reductions.
• Says there will be no OCR review on 25 March 2020.
• Says govt operating expansionary fiscal policy, has imminent intentions to increase support with fiscal package to provide economic stimulus.
• Says revised OCR will be effective from March 17, 2020.
• says members met for an extraordinary session of monetary policy committee on March 15 in response to deteriorating economic situation from COVID-19
• says demand for New Zealand's goods & services will be constrained, as will domestic production due to COVID-19 outbreak
• Says staff advised that OCR of 0.25% currently lower limit, given operational readiness of the financial system for very low/negative interest rates.
• Reserve Bank of NZ says spending and investment will be subdued for an extended period while responses to COVID-19 virus evolve.
• RBNZ says large scale asset purchases of NZ govt bonds next best monetary tool available; committee agreed additional tools not needed at this point.

Note: There's a presser at 22.00 GMT

NZD/USD implications

The NZ dollar was trading at 59.65 US cents at 7:45 am in Wellington versus 60.57 cents late Friday in New York ahead of the announcement.

For the NZD, this is arguably slightly good news, analysts at ANZ Bank suggested, as they feel it takes the RBNZ off the side-lines to firmly midfield, with strong support provided by fiscal policy:

"We note the RBNZ opined that “the New Zealand dollar exchange rate has also depreciated against our trading partners acting as a partial buffer for export earnings”. That’s code for “don’t expect us to stand in the way of NZD weakness”. However, some consistency is required – not all currencies can weaken at the same time and this is a global epidemic/economic slowdown – hence we expect the NZD to be under mild downward pressure as opposed to collapsing."