MNI REVIEW: RBNZ Makes Emergency Cut, Says QE May Come Next

By Lachlan Colquhoun

     SYDNEY(MNI) - The Reserve Bank of New Zealand said it has cut its official

cash rate by 75 basis points to a record low 0.25% and that its next step would

be quantitative easing.

     Rates will stay at their new level for "at least the next 12 months," the

Bank said, and, if further action is needed, it will begin "a Large Scale Asset

Purchase programme of New Zealand government bonds" which "would be preferable

to further OCR reductions."

     At a press conference today, RBNZ Governor Adrian Orr ruled out negative

interest rates as a policy tool.

     In an unscheduled announcement brought on by the coronavjrus pandemic, the

RBNZ said the negative impact on the NZ economy "is and will continue to be

significant" as demand for exports is constrained along with domestic

production.

     NZ was looking at a period of subdued spending and investment while

responses to the pandemic evolved.

     "The negative economic implications of the COVID-19 virus continue to rise

warranting further monetary stimulus," the RBNZ said.

     "Since the outbreak of the virus, global trade, travel, and business and

consumer spending have been curtailed significantly. Increasingly, governments

internationally have imposed a variety of restraints on people movement within

and across national borders in order to mitigate the virus transmission."

     The Bank has suspended its next scheduled interest rate meeting, due on

March 25.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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