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FI MARKETS ANALYSIS: RBNZ Negative Rates a Possibility

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Following the RBNZ's surprise 50bps cut in its OCR to 1.00%, Governor Adrian Orr said the bank could have to shift to negative rates if it found itself needing to stimulate the economy further, given global rates were now so low. Governor Orr also noted the Bank was looking at effectiveness globally of quantitative easing, adding a drop in the OCR to 1.00% helps the export sector more, due to a lower exchange rate. Japan, Sweden and Switzerland have been operating with negative interest rates for a while. It could see banks charging interest on their deposits, but in theory should boost economic activity and stave off inflation.

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