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MNI (London)
--Likely To Repeat Can Use Negative Rates, More QE If Needed In Future
By Lachlan Colquhoun
     SYDNEY (MNI) - The Reserve Bank of New Zealand is set to keep policy
unchanged Wednesday, leaving the official cash rate at 0.25% and the cumulative
stock of asset purchases to be completed over the next 12 months at NZD60
billion.
     With New Zealand ahead of the curve in fighting the epidemiological impact
of the Covid-19 pandemic, the central bank can use the June meeting as a chance
to take stock of the economy, studying how previous policy decisions are playing
out. 
     The RBNZ has been clear that it will not rule out unconventional policy
measures if needed, including the use of negative interest rates, but it would
be unusual for the Bank to make a major announcement at a meeting which does not
include a quarterly Monetary Policy Statement.
     In addition to leaving open the move to negative rates, the RBNZ has also
not ruled out buying NZ Government bonds on the primary market or buying
corporate debt.
     The Bank has written to commercial banks asking them to be ready for
negative rates by the end of the year, but has said this may not be necessary if
the economy improves.
     --POLICY IN PLACE
     The Bank cut the OCR by 75bps in March and left it unchanged in May, as it
focused on its Large Scale Asset Purchase (LSAP) program to buy NZ Government
and semi-Government debt on the secondary market.
     The NZ economy contracted by 1.6% in the first quarter of 2020 and a much
larger contraction is expected in the second quarter, but the national lockdown
ended earlier in June after the country's success in containing the virus.
     This has led to some hopes the downturn could be less than initially
feared, with a quicker recovery coming through.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MMNRB$,M$A$$$,M$N$$$,MT$$$$,MX$$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com