MNI POLICY: Dovish RBNZ Governor Underlines Signal To Markets

By Lachlan Colquhoun

     LONDON (MNI) - It was important that financial markets had understood and

reacted swiftly to the Reserve Bank of New Zealand's policy shift, Governor

Adrian Orr said Friday, as he welcomed a response to Wednesday's rate statement

which send the kiwi dollar lower and bonds higher.

     "What I was pleased with from the outcome of that discussion is that

markets have shown they understand what we are focussed on," Orr said in

response to a question after delivering a speech Friday on the RBNZ's new policy

making framework.

     "If financial markets watch us and we watch then then we are just looking

in a mirror. So markets have to be forward looking and work very hard to learn

what we are trying to achieve," he said.

     Addressing the new policy framework, Orr said the changes to the Monetary

Policy framework would bring "greater transparency and accountability" on how

the Bank served NZ society.

     Orr said the new framework was a starting point for the Bank's new policy

committee, which will make the next decision on official interest rates on May 8

and have input into the next Statement on Monetary Policy.

     "The dual inflation and employment mandate, and the more transparent

committee decision making structure, will better display our monetary policy

processes, benefits and limitation," he added.

     Orr said the Bank's policies had a critical role in managing global risks

such as the economic impact of climate change, increased debt and technology

change and their impact on society.

     On Wednesday, the Bank moved to an easing bias while keeping rates on hold

at 1.75%, saying the next move in interest rates was likely to be downwards,

citing the slowing domestic and global economies as requiring expansionary

monetary policy.

     Given the focus on employment, and the fact the jobless rate increased to

4.3% from 3.9% in the last quarter of 2018, the market continues to price in

rate cuts.

     The Kiwi was at 0.6775 against the U.S. dollar shortly after Orr's speech,

last trading at 0.6785.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

[TOPICS: MMNRB$,M$A$$$,M$N$$$]