XE Data Update - RBNZ Cut OCR By 0.75% To 0.25%

The RBNZ cut the Official Cash Rate (OCR) by 0.75% to 0.25%.

This was an emergency rate cut in response to the growing negative economic implications of the COVID-19 virus.

The key points in the RBNZ statement are:

• Negative implications to the NZ economy from global COVID-129 outbreak is, and will continue to be, significant
• NZ’s financial system remains sound and major financial institutions are well capitalised and liquid
• Ensuring banking system continues to function normally
• Committee agreed unanimously to keep OCT at 0.25% for at least 12 months
• Committee agreed if further stimulus is required, large scale asset purchase programme of NZ Govt bonds preferable to further OCR reductions
• There will be no OCR review on the scheduled25th March meeting.
• NZ Govt operating an expansionary fiscal policy, has imminent intentions to increase support with fiscal package to provide economic stimulus
• Members met for extraordinary session on 15th March in response to the deteriorating economic situation from COVID-19
• Demand for NZ’s goods & services will be constrained, as will domestic production due to the outbreak
• Staff advised that OCR of 0.25% currently lower limit, given operational readiness of financial system for very low/negative interest rates
• Spending and investment will be subdued for an extended period while responses to the virus evolve
• Large scale asset purchases of NZ govt bonds next best tool available; committee agreed additional tools mot needed at this points

The NZD is lower in immediate response.

The next OCR decision will be held on the 13th May 2020.

Below is link to the RBNZ press release:

https://www.rbnz.govt.nz/news/2020/03/ocr-reduced-to-025-percent-for-next-12-months

Current indicative levels are (market pricing is wide):

NZD-USD 0.5970 / 0.6010

NZD-AUD 0.9720 / 0.775

NZD-EUR 0.5400 / 0.5430

NZD-GBP 0.4865 / 0.4905

NZD-JPY 64.10 / 64.45

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