Reserve Bank Has No Intention To End FLP Early, Says It's Working As Expected

In response to a series of questions asked by interest.co.nz, the RBNZ said that it will not be ending its Funding for Lending Programme (FLP) early, despite inflation running at a three-decade high.

• The FLP will stay in place until its scheduled rollback in December "to ensure this tool remains credible for future use if required." The Reserve Bank's spokesman said it has worked broadly as intended.
• The Programme was launched in December 2020 to add monetary stimulus by allowing eligible banks to borrow money directly from the central bank at the official cash rate (OCR).
• The Reserve Bank's spokesman added that the OCR remains the primary tool for adjusting monetary policy settings, while the FLP will be assessed as part of the ongoing Monetary Policy Remit Review.
• Note that the RBNZ has recently come under increased political pressure, as the opposition called for a public inquiry into its pandemic response, while a suite of former officials criticised the Bank for policy errors.