Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr explains the interest rate decision at a press conference following Wednesday’s monetary policy meeting.
Orr is responding to questions from the media.
Key quotes
It is a mistake to think that our projections show a slower pace of cuts.
Projections consistent with 50 basis points in February depending on activity.
developing story….
Market reaction to RBNZ Orr conference
NZD/USD trims gains to trade near 0.5850 following Orr’s comments, still up 0.35% on the day.
The RBNZ FAQs
The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are to achieve and maintain price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the range between 1% and 3% – and to support maximum sustainable employment.
The Monetary Policy Committee (MPC) of the Reserve Bank of New Zealand (RBNZ) decides the appropriate level of the Official Cash Rate (OCR) in accordance with its objectives. When inflation is above target, the bank will try to control it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they generate higher returns, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the NZD.
Employment is important to the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration of inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise increasingly rapidly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says. central.
In extreme situations, the Reserve Bank of New Zealand (RBNZ) may implement a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to purchase assets (usually government or corporate bonds) from banks and other financial institutions with the aim of increasing the domestic money supply and stimulating economic activity. QE generally results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the central bank’s objectives. The RBNZ used it during the Covid-19 pandemic.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
