MNI REVIEW: RBNZ On Hold; Staff To Ensure Broad Policy Options

--May Consider Foreign Asset Purchases If Need Arises

By Lachlan Colquhoun

     SYDNEY (MNI) - The Reserve Bank of New Zealand kept official interest rates

on hold at a record low 0.25% Wednesday, but says it stands ready for further

monetary easing, with staff working to ensure a broad range of policy options

are available if needed, including the possibility of foreign asset purchases.

     Bank officials  "working towards ensuring a broader range of monetary

policy tools would be deployable in coming months," the statement accompanying

the decision said.

     These options included a term lending facility, reductions in the official

cash rate, foreign asset purchases, as well as reassessing the appropriate scale

of the LSAP.

     The Bank has already written to commercial banks asking them to be ready

for a regime of negative interest rates by the end of the year, should that

become necessary.

     --NO QE INCREASE

     The latest policy decision was widely expected. The RBNZ sliced 75 basis

point from the OCR in March to a record low 0.25% and introduced its Large Scale

Asset Purchase scheme, which was increased NZ$60 billion in May.

     While making no change to the LSAP program today, the Bank's statement said

that risks "remain skewed to the downside," despite the "marginally stronger

starting point for the NZ economy."

     It was, however, not yet clear if the stimulus delivered so far was

"sufficient to reach the Bank's mandate."

     New Zealand moved out of lockdown earlier this month after the country's

public health success in containing the Covid-19 virus, although the second

quarter is still expected to see a major hit to GDP.

     First quarter growth came in at -1.6%, meaning NZ is now in recession.

     The RBNZ said any expansion in the LSAP program would be driven by the

economic outlook, and would also "need to be of significant magnitude to make a

meaningful difference."

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

[TOPICS: M$A$$$,M$N$$$,MT$$$$,MX$$$$]