The RBNZ keeps record low rates and unveils new lending program

The New Zealand’s central bank kept its benchmark interest rate unchanged in its today’s policy meeting and introduced new funding program that would reduce costs for lenders.

The RBNZ held its official cash rate at record lows and signaled that rates would stay there until March 2021, with possibility of shifting to negative rates, to support the economy during the crisis, remaining on the table.

The central bank’s governor Adrian Orr said that new lending scheme, worth around NZ$ 28 billion and to be launched in December, would likely have a greater impact than further cutting rates as it will reduce banks’ funding costs and encourage them to offer cheaper loans.

He also said that it was too early to say whether the latest measures decreased possibility of introducing negative rates, but positive market reaction on central bank’s decision (Kiwi dollar surged to new 1 ½ year high) support the notion.

The central bank announced that monetary policy will need to remain stimulatory for a long time to provide support to the economy, keeping the door open for further stimulus as unemployment rate is expected to rise further and inflation was projected to remain below central bank’s target range.