RBNZ governor firmly dovish, says focus is on stimulus
WELLINGTON: The Reserve Bank will not raise interest rates and could go negative, RBNZ governor Adrian Orr reiterated yesterday.
‘‘We have no intention of raising interest rates. Our task now and for the foreseeable future is get them down, keep them down,’’ he told the AM Show.
‘‘The game here is monetary policy stimulus, without doubt,’’ he added.
He reiterated that the bank had committed to keeping the official cash rate at 0.25% for at least 12 months and he did not rule out negative interest rates.
‘‘We’ve been saying to banks: Get your act together, be prepared, make sure you are able to put a negative sign in front of your wholesale interest rates if we need to go there,’’ he said.
He said the central bank had succeeded in pushing down wholesale rates and retail rates were following suit.
‘‘We’ve been making it clear it is in their best interest to pass on those lower borrowing rates to their consumers’ mortgage rates,’’ he said, referring to the banks.
Mr Orr also said that while New Zealand was better placed than most countries after managing to contain Covid19, ‘‘without a doubt we are going to need the rest of the world to get into the same shape that we’ve managed too because we rely on trade, we rely on tourism’’.
He said economic data had pointed to a ‘‘really good rebound’’ after lockdown restrictions were lifted but he still did not expect the economy to be back at full employment and full activity until 2022, ‘‘and even that is uncertain’’.
Mr Orr said the central bank would update the public on the size of its quantitative easing programme and the preparedness of banks to be able to manage negative interest rates, at the August review. That review is scheduled for August 12.
The RBNZ is committed to a largescale asset purchase programme of $60 billion but economists widely expect it to increase that amount at the August review. ANZ Bank, for example, is tipping it to increase to $90 billion. — BusinessDesk