New Zealand Monetary Authorities to Stop an Asset Buying Program
July 14, 2021
The U.S. dollar’s most significant movement overnight has been a 1.0% decline against the New Zealand dollar, which rose following an initial tapering of monetary policy stimulus announced by the Monetary Policy Committee of the Reserve Bank of New Zealand. A released statement after a scheduled policy review, opined
that, in the absence of any further significant economic shocks, more persistent consumer price inflation pressure is expected to build over time due to rising domestic capacity pressures and growing labor shortages. However, the Committee noted that uncertainties remain as to the pace and magnitude of any pass-through of costs onto medium term inflation, especially given reported under-utilization of labor, modest wage growth, and well anchored inflation expectations. The Committee noted that medium-term inflation and employment would likely remain below its Remit objectives in the absence of some ongoing monetary support. However, the Committee agreed that the level of monetary stimulus could now be reduced to minimize the risk of not meeting its [consumer price and employment] mandate.
Accordingly, RBNZ officials agreed to stop quantitative stimulus via purchases via the Large Scale Asset Purchase Program as of next week, but the Official Cash Rate was left unchanged at 0.25%. This record low level has been in effect since a 75-basis point reduction in the middle of March 2020. Second-quarter CPI data are scheduled to be released in New Zealand on Friday.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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