Breaking: RBNZ unchanged and sticks to guidance of March 16

The Reserve Bank of New Zealand has presented its Monetary Policy Statement (MPS) today which was expected to be all about the RBNZ unveiling a Funding for Lending Programme (FLP).

The FLP is a scheme that will be offering funds directly to the banks at a rate near OCR.

Markets are especially looking for comments about the likelihood of a negative OCR.

RBNZ MPS

• 10-Nov-2020 19:00:47 - RESERVE BANK OF NZ SAYS AGREED TO PROVIDE ADDITIONAL MONETARY STIMULUS TO THE ECONOMY IN ORDER TO MEET ITS CONSUMER PRICE INFLATION AND EMPLOYMENT REMIT
• 10-Nov-2020 19:01:03 - RESERVE BANK OF NZ SAYS WE EXPECT AN ONGOING INCREASE IN UNEMPLOYMENT AS THE ECONOMY ADJUSTS
• 10-Nov-2020 19:01:13 - RESERVE BANK OF NZ SAYS CONSUMER PRICE INFLATION IS ALSO PROJECTED TO REMAIN AT THE LOWER-END OF THE REMIT TARGET RANGE FOR A PERIOD
• 10-Nov-2020 19:01:35 - RESERVE BANK OF NZ SAYS AGREED THAT MONETARY POLICY WILL NEED TO REMAIN STIMULATORY FOR A LONG TIME
• 10-Nov-2020 19:01:50 - RESERVE BANK OF NZ SAYS COMMITTEE AGREED IT MUST REMAIN PREPARED TO PROVIDE ADDITIONAL SUPPORT IF NECESSARY
• More to come...

NZD/USD reaction

April rate cuts are already baked into the price which had been consolidating in the low 0.68s ahead of today’s MPS.

The kiwi has been tracking performances in global stocks.

''If we see more strength, that speaks to more NZD strength on the general bounce in risk appetite and offshore equity hedging flows,'' analysts at ANZ argued.

''The Fed’s new average inflation targeting framework means that policy will be easy for some time even with an effective vaccine, and that should be a long term positive for risk too.''

• NZD/CAD Price Analysis: Target achieved ahead of RBNZ risk

From here, the analysts at ANZ said that ''much will depend on how the data and virus news pans out into the New Year and the effectiveness of the FLP at lowering retail interest rates (the programme’s measure of success).''

''One thing is clear: aggressive stimulus doesn’t make sense forever and policy will become more nuanced in time.''

About the RBNZ's MPS

The New Zealand Reserve Bank publishes its Monetary Policy Statement (MPS) quarterly.

Each Monetary Policy Statement must set out: how the Reserve Bank proposes to achieve its targets; how it proposes to formulate and implement monetary policy during the next five years; and how monetary policy has been implemented since the last Monetary Policy Statement.