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A negative OCR will become an option in future

Following the monetary policy statement release, the RBNZ is out with the minutes of the meeting, with the key highlights found below (via Reuters)

Members agreed that an expansion to the LSAP programme is the most effective way to deliver further stimulus at this time.

Adding inflation-indexed government bonds (IIBS) to the LSAP.

Committee noted that a negative official cash rate (OCR) will become an option in future.

At present financial institutions are not yet operationally ready for negative OCR.

Noted that discussions with financial institutions about preparing for a negative OCR are ongoing.

Committee reaffirmed its forward guidance that the OCR will remain at 0.25 percent until early 2021.

Tools available include further reductions in the OCR; a term lending facility; and adding other asset classes, such as foreign assets, to the LSAP programme.

Banking system is sound and markets are functioning satisfactorily.

Committee agreed that risks are to the downside of baseline scenario.

Agreed that a ‘least regrets’ monetary policy approach is needed, delivering stimulus sooner rather than later.

More stimulus is needed to support a medium-term recovery in economic activity, employment, and inflation.

 

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