RBNZ Governor Orr: Actively preparing a package of additional monetary policy tools to use if needed

The Reserve bank of New Zealand (RBNZ) Governor Adrian Orr is actively preparing a package of additional monetary policy tools to use if needed.

We have been effective in lowering interest rates across the board, and ensuring there is plentiful liquidity in the financial system,

Orr said in a speech delivered to the Victoria University School of Government and Policy Studies.

He also reiterated that the RBNZ was actively preparing additional monetary policy tools to use if needed, which included negative wholesale interest rates, further quantitative easing, direct lending to banks and ongoing forward guidance.

Full speech

Key comments

• Says have been effective in lowering interest rates across the board.
• Says actively preparing a package of additional monetary policy tools to use if needed.
• Says options include negative wholesale interest rates, further QE, direct lending to banks, and ongoing forward guidance about our intentions.
• Says need banks to use risk models, capital, liquidity headroom to support customers’ best long-term interests.

Market implications

We are essentially getting a full reiteration of the Bank’s “no regrets/do-what-it-takes” stance, perceived as dovish, but we are not seeing the price action reflect the implications. The bird is bid, despite the dovishness and a firm US dollar.

Looking ahead, it’s less about “FX policy” or directly addressing the level of the NZD and more about collective policy settings that will ease financial conditions while also undermining NZD strength,

analysts at ANZ bank explained earlier.