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RBNZ to Refresh Unconventional Policy Strategy

RBNZ to Refresh Unconventional Policy Strategy - NZD lower in response

In response to an Official Information Request from Bloomberg, the RBNZ has stated they are taking another look at its strategy for unconventional monetary policy.

The key points mentioned on the Bloomberg article are:

Reserve Bank has begun scoping a project to refresh our unconventional monetary policy strategy and implementation

RBNZ cut its Official Cash Rate (OCR) to 1.5% in May & economists expect another reduction to 1.25% next month amid tepid inflation and slowing economic growth
Market pricing indicates the OCR will fall to 1.00% by end of 2019
The report suggests 3 non-standard measure:

Taking the OCR below 0.00% - this is thought to be limited to negative 0.35% before the risk of hoarding physical cash
Large scale purchased of government or corporate bonds
Offering loans to banks below market rates conditional on them increasing lending
They believe such measures are unlikely to fully deliver the desired results and would likely require targeted fiscal policy use.
The above information was contained in a paper presented to Finance Minister Grant Robertson in January
The NZD dipped lower in immediate response.

The next OCR decision will be held on the 7th August.

Current indicative levels are:
NZD-USD 0.6730 / 0.6755
NZD-AUD 0.9575 / 0.9600
NZD-EUR 0.6005 / 0.6030
NZD-GBP 0.5395 / 0.5420
NZD-JPY 72.70 / 72.95


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