According to ANZ analysts, when the Official Cash Rate was cut 50bp to 1% this week, the RBNZ also quietly repriced a key standing facility and this repricing of the Bond Lending Facility (from 150bp under OCR to 100bp under OCR), prevented it trading at negative interest rates.

Key Quotes

“This repricing buys the RBNZ some time, but a broader, communicated strategy for potential unconventional policy is needed.”

“As the zero lower bound approaches, the RBNZ could choose to implement negative interest rates, lower long-term interest rates via government bond and swap rates purchases, and term lending facilities.”

“But the RBNZ will need to navigate several challenges including risks to the central bank balance sheet, the consequences of a deterioration in bank profitability, and an impairment in market functioning.”

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