MNI POLICY: Zero Rates Unlikely But Not Ruled Out: RBNZ Orr

By Lachlan Colquhoun

     SYDNEY (MNI) - Lowering official interest rates into the "zero bound" was

an "unlikely outcome" but could not be ruled out, Reserve Bank of New Zealand

Governor Adrian Orr said Tuesday.

     The chance of the Bank's cash rate going to zero -- 100 basis points lower

than its current level -- was about 20%, Orr said.

     "That means while an effective zero bound for interest rates is far from

the most likely outcome in New Zealand, it can't be ruled out," Orr said.

     The Bank was focused on steps to sustain economic growth, and the option of

unconventional policy measures would only be considered when official rates

reached the zero lower bound.

     "The RBNZ has not, and still does not, need to use alternative monetary

policy instruments to the Official Cash Rate (OCR). But it is best to be

prepared," Orr said.

     --UNCONVENTIONAL MEASURES

     The RBNZ had discussed unconventional policy options, and these included

negative rates, interest rate swaps, asset purchases and forward guidance, he

noted.

     The RBNZ cut interest rates by 75 basis points to 1% in 2019 and has left

rates unchanged since August as the NZ economy has recovered and inflation and

employment moved into the target ranges, helped along by a major program of

fiscal spending by the NZ Government.

     The RBNZ announces its next interest rate decision on March 25, with

growing expectations of a fresh cut as the economy falters on the coronavirus

outbreak.

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

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