MNI BRIEF: RBNZ's Orr Placates Govt On House Price Gains

Reserve Bank of New Zealand Governor Adrian Orr took the unusual step Tuesday of writing a public letter to the nation's Finance Minister Grant Robertson, assuring him in response to an enquiry that the central bank is taking housing prices into account in its monetary policy.

The RBNZ has so far been relaxed about the surging property market, but recently announced it would consider re-introducing Loan-to-Value Ratio regulations to limit risky loans next year. Some observers, including former RBNZ officials, have warned that the housing market is developing into a bubble which threatens financial stability.

In his letter, Orr assured Robertson that the central bank gives consideration to the potential impact of monetary policy and financial stability from financial assets, including house prices. "Like other central banks globally, our key response to the COVID-19 economic shock has been to lower interest rates using a variety of tools." The RBNZ releases its next Financial Stability Review Wednesday, and is expected to address the housing issue in more detail then.