last week: emergency rate cut; this week: QE started! RBNZ moves again

The Bank of New Zealand announced on Monday (March 23) that it will launch a government bond purchase of up to NZ $ 30 billion (US $ 17 billion), following other central bank initiatives to deal with the impact of the Covid-19.

This is an incentive from New Zealand Federal Reserve after the 75-bps emergency rate cut last Monday. 

The RBNZ said that its large-scale asset purchase plan will be launched this week and will be implemented in the next 12 months, covering multiple-year bonds.

The RBNZ said that unnecessary tightening of financial conditions over the past week has weakened the impact of lowering the official overnight interest rate (OCR) in fulfilling the central bank's mission. "The Monetary Policy Committee believes that further monetary stimulus is needed to achieve inflation and employment," the statement states.

The RBNZ held an emergency meeting last week to reduce the target interest rate by 75 bps to a record low of 0.25% and promised to keep interest rates unchanged at that level for at least the next 12 months. 

After the RBNZ issued the above statement within a day, the New Zealand dollar fell 1.7% against the US dollar in Asia, and once fell below 0.56. 

ANZ Chief Analyst Sharon Zollner said in the report that "the scale of this solution is huge, and our analysis last week showed that it needs to buy at least $ 15-20 billion in bonds each year, and the government announced a larger purchase."

The latest data from the New Zealand Ministry of Health on Monday showed that 36 new cases of new coronavirus cases were confirmed in the country, and a total of 102 cases were confirmed.

New Zealand Prime Minister Ardern said the country would enter a state of self-isolation and raise the alert level to 4 within 48 hours. Coronavirus has been spread in the community. All indoor and outdoor activities must be stopped. Non-essential corporate activities must now be stopped.

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