The Reserve Bank’s balance sheet will continue to grow as it supports the economy and financial system in response to
the COVID-19 pandemic.
In a speech to the ANZ-KangaNews New Zealand Capital Markets Forum, Assistant Governor Christian Hawkesby outlined how
the Bank is using its balance sheet to achieve its monetary policy mandate of low and stable inflation and full
employment, as well as supporting financial stability.
The Bank’s balance sheet has more than doubled since January to about $60 billion.
“In an environment of where the Official Cash Rate (OCR) is near its lower limits, the size and composition of our
balance will inevitably become a more active tool for our monetary policy decisions,” Mr Hawkesby said.
The COVID-19 outbreak resulted in a sharp and sizeable shock to the economy. Containment measures severely curtailed
economic activity, while heightened uncertainty and concerns about liquidity hampered the functioning of financial
markets.
The Reserve Bank, in keeping with central banks worldwide, acted swiftly and aggressively to preserve smooth market
functioning and use monetary policy to lower interest rates. It offered new lending operations to provide ample
liquidity, and implemented a Large Scale Asset Purchase (LSAP) Programme.
“Our goal is not to maximise our profits or dividend from the activities on our balance sheet. We use our balance sheet
to achieve our ultimate policy objectives of monetary and financial stability,” Mr Hawkesby said.
He also added that it was not the Bank’s goal to minimise financial risk on the balance sheet during these unprecedented
times.
“But these risks need to be very well-understood, well-explained, and managed on a no surprises basis.”
The impact of the Reserve Bank’s measures on its balance sheet would remain sizeable for some time, Mr Hawkesby said.
“We recently expanded our LSAP programme up to $100 billion and are preparing the groundwork to use additional tools if
needed such as a negative OCR or Funding for Lending Programme (FLP) in order to achieve our remit and ensure the long
term prosperity of New Zealanders.”More information:Speech - COVID-19 and the Reserve Bank's Balance SheetReserve Bank Balance Sheet - R1