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MNI: RBNZ "On Course" To Tighten Despite Lockdown, Says Orr

MNI (Sydney)
SYDNEY (MNI)

Reserve Bank of New Zealand Governor Adrian Orr said there is a "clear direction" is to tighten monetary policy despite a surprise move on Wednesday to leave interest rates on hold.

The RBNZ was widely expected to hike rates today from the record of 0.25%, but the discovery of a single COVID-19 case yesterday has put the country back into a state of lockdown. The cluster grew to seven cases on Wednesday.

Speaking at a press conference after the decision, Orr said that although the bank's inclination was to tighten policy, the RBNZ had taken "time to pause while we observe the outcomes of the next few days and weeks."

Orr said that a key reason to tighten policy was the runaway property market, where house prices were now "above sustainable levels."

He would not be drawn on whether the bank would raise rates at its next meeting, saying any decision depended on the length of the new lockdowns, but said the RBNZ remained "on course to be managing a tightening of policy" given current inflation data and conditions in the labour market.

Asked if the RBNZ would now sell some of the NZD53 billion in Government bonds it had purchased as part of its bond buying program, Assistant Governor Christian Hawkesby said the "main practical decision" was whether the bank would reinvest after the maturing of the 2023 bonds it had purchased.

This gave the bank "plenty of time to outline a plan" which would be communicated clearly to the market, Hawkesby said.

The RBNZ had not "typically re-invested maturing assets," he said.

MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com

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