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Breaking: RBNZ unchanged and sticks to guidance of March 16

• The Reserve Bank of New Zealand holds OCR steady at 0.25%, introducing FLP.
• NZD/USD little changed in a muted reaction between support and resistance 0.6800/40.

The Reserve Bank of New Zealand has presented its Monetary Policy Statement (MPS) today which was expected to be all about the RBNZ unveiling a Funding for Lending Programme (FLP).

The FLP is a scheme that will be offering funds directly to the banks at a rate near OCR.

Markets are especially looking for comments about the likelihood of a negative OCR.

Says prepared to reduce the OCR if required. Says agreed to provide additional monetary stimulus to the economy in order to meet its consumer price inflation and employment remit. Says we expect an ongoing increase in unemployment as the economy adjusts Says consumer price inflation is also projected to remain at the lower-end of the remit target range for a period Says agreed that monetary policy will need to remain stimulatory for a long time Says committee agreed it must remain prepared to provide additional support if necessary

Committee reached a consensus to maintain existing LSAP programme of maximum nz$100 bln by June 2022; Committee reached a consensus to direct the bank to implement an flp in early december 2020; The banking system is on track to be operationally ready for negative interest rates by year-end; Committee agreed that it was prepared to lower the OCR to provide additional stimulus if required; Committee reaffirmed that an FLP, a lower or negative OCR, purchases of foreign assets, and interest rate swaps remain under consideration; Members agreed with the staff assessment that an flp would be an effective way to provide additional monetary stimulus; Members agreed that flp was the best tool to deploy at this time given the committee’s principles for alternative monetary policy instruments; Committee noted that other prudential policy settings could be adjusted to reduce risks to the financial system if required; Members noted that the reserve bank will consult on the possible reintroduction of limits on high loan-to-value ratio lending, in order to slow the build-up of riskier lending on bank balance sheets; There was less regret associated with the risk of temporarily overshooting their policy remit given economic situation; There were still challenges to overcome before widespread vaccine availability could be achieved.

The price is steady at around 0.6830 on the as expected outcome. Read from source….