MNI POLICY: RBNZ Preparing For More Policy Easing: Orr

The Reserve Bank of New Zealand is "actively preparing" a package of additional monetary policy measures, including negative interest rates and further quantitative easing, Governor Adrian Orr said Wednesday.

In a speech at the Victoria University of Wellington School of Government, Orr also flagged the possibility of direct lending to banks and ongoing forward guidance about the Bank's intentions.

Orr said that the RBNZ's measures this year, such as its Large Scale Asset Purchase (LSAP) program of purchasing NZ Government bonds and cutting official rates to a record low of 0.25% had been effectiive in lowering interest rates "across the board" and ensuring liquidity in the financial system.

The additional policy measures were being prepared "to use if needed,' and to ensure that monetary policy would remain effective without "undue risk."

The RBNZ has previously said it has written to commercial banks asking them to be prepared if necessary for zero or negative official rates by the end of the year, although it does not expect that retail lending rates will go into negative territory.

Asked about the strength of the New Zealand dollar in a question and answer session following the speech, Orr was sanguine, expressing no concerns over the 'relative' level.

"The exchange rate is one currency relative to another. This Covid-19 pandemic has impacted all countries at the same time. Relative inflation, relative credit risk, all these things which matter to the value of a nation's currency have all been broadly impacted. So I would say the exchange rate is behaving as one would expect rather than in an unexpected fashion," he said.