The Reserve Bank is to buy back up to $30 billion of government bonds to give further support to the economy.Photo: RNZ / Alexander Robertson
On Friday, the central bank announced new measures, including term loans to banks, agreement with the US Federal Reserve for access to up to $US30 billion, and
intervening in markets to maintain stability.Follow our live blog for the latest coronavirus updates
The Monetary Policy Committee (MPC) decided to implement a large scale asset purchase programme (LSAP) of New Zealand
government bonds.
In a statement the Reserve Bank said the negative economic implications of the coronavirus outbreak had continued to
intensify and the committee agreed that further monetary stimulus was needed to meet its inflation and employment
objectives.
"Globally, the number of people infected with the virus has increased rapidly and measures to contain the outbreak have
become more restrictive. Global trade and travel, and business and consumer spending have been curtailed significantly,"
the statement said.
"The severity of the impacts on the New Zealand economy has increased. Weaker global activity is affecting the economy
through a range of channels, not just reduced trade. Domestic measures to contain the outbreak of the virus are also
reducing economic activity. Employment and inflation are expected to fall relative to their targets in the near term.
"In addition, financial conditions have tightened unnecessarily over the past week, reducing the impact of the low OCR
(official cash rate) on achieving the MPC's mandate. Heightened risk aversion has caused a rise in interest rates on
long-term New Zealand government bonds and the cost of bank funding."
The Bank's statement said the asset purchase would take place over the next twelve months and involve up to $30 billion
of New Zealand government bonds across a range of maturities in the secondary market.
"The programme aims to provide further support to the economy, build confidence, and keep interest rates on government
bonds low."