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“Next year, if conditions permit, the Reserve Bank will consider whether a further delay is necessary.”
He added: “We are acting now to help support lending in the economy at a time of considerable uncertainty. The Reserve Bank expects banks to use this flexibility to maintain lending to households and businesses. Banks have substantial buffers above current regulatory minimums, and we encourage them to use these.”
The central bank has put other regulatory reform measures that could be delayed on hold to “ease the burden on financial institutions amid the current uncertainty”. These moves will be announced in the coming days.
Assistant Governor Christian Hawkesby said the bank was “ensuring there is sufficient liquidity in the financial system” through its regular market operations.
“[The Reserve Bank] has a range of operational tools available to support liquidity and market functioning in New Zealand. This has helped domestic cash markets and foreign exchange swap markets continue to function effectively in recent weeks,” Hawkesby said.
“Banks currently have strong liquidity and funding positions to manage short-term disruption to offshore funding markets. We will continue to monitor developments closely and engage regularly with market participants to ensure we are ready to provide support when needed.”
“Deep” recession expected
Last week, share markets fell sharply as concerns about global spreads intensified, prompting efforts to support markets.
Asked about the likelihood of a recession, ANZ chief economist Sharon Zollner said the bank expected it would be “in trouble”.
“We are already seeing a recession; the blow to tourism from travel bans alone is enough to cause one. But I should quickly add that this will hit tourism next month or over the next few months. There are at least two in any case, so the sacrifice may have some significance.”
The Government will work out the details today of a multibillion-dollar package aimed at helping workers, businesses, the healthcare system and society's most vulnerable people.
Details will be announced tomorrow.
The Reserve Bank of New Zealand's announcement comes as two new COVID-19 cases have been confirmed — one in Wellington and one in Queenstown — bringing New Zealand's total number of confirmed cases to eight.
Strict travel restrictions took effect at 1h in the early morning, meaning all travellers arriving from outside the Pacific Islands must now self-isolate for 14 days.
Lowest ever! Reserve Bank cuts OCR to 0.25% for 12 months!
The Reserve Bank has cut the official cash rate (OCR) to 0.25% for the next 12 months as the effects of coronavirus, or COVID-19, further unsettle the economy.
The Reserve Bank this morning cut the official cash rate to a record low of 0.25% as the coronavirus pandemic spreads.
In an announcement just released, the Reserve Bank cut the OCR by 0.75% and said the new low rate would remain in place for the next 12 months.
In an announcement just released, the Reserve Bank cut the OCR by 0.75% and said the new low rate would remain in place for the next 12 months.
Westpac has just announced that it will pass on the full benefit of the OCR cut to customers.
“The negative economic effects of the COVID-19 virus continue to grow, requiring further monetary stimulus,” the Reserve Bank said in a statement.
“Since the outbreak of the virus, global trade, travel, business and consumer spending have fallen significantly. Governments around the world are increasingly restricting people's movements within and across borders to slow the spread of the virus.”
The Reserve Bank has also decided to delay implementing new capital rules that would require banks to hold more capital.
“The negative economic effects of the COVID-19 virus continue to grow, requiring further monetary stimulus,” the Reserve Bank said in a statement.
“Since the outbreak of the virus, global trade, travel, business and consumer spending have fallen significantly. Governments around the world are increasingly restricting people's movements within and across borders to slow the spread of the virus.”
The Reserve Bank has also decided to delay implementing new capital rules that would require banks to hold more capital.
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Significant negative effects on New Zealand's economy
“The negative effects on New Zealand's economy are, and will continue to be, significant. Demand for New Zealand goods and services will be constrained, as will domestic production. Spending and investment will remain subdued for an extended period, while the New Zealand economy's response to the COVID-19 virus evolves.”
The announcement that the cash rate would remain at its new level for a year marks a new move for the Reserve Bank. It has been preparing for the possibility that wholesale interest rates may eventually need to turn negative.
The bank said the decision to cut the OCR so rapidly was unanimous.
The bank said several factors “will continue to assist and support economic activity in New Zealand”, with the financial system remaining sound and major banks well capitalised.
He said: “The Government is implementing expansionary fiscal policy and is keen to increase support through a fiscal package providing targeted and broad-based economic stimulus.
“The New Zealand dollar exchange rate has also fallen as our trading partners' currencies have depreciated.”
At 7:45 that morning, the New Zealand dollar was trading at 59.65 US cents, compared with 60.57 US cents in late New York trading before the announcement.
In the latest Monetary Policy Statement on 12 February, Reserve Bank Governor Adrian Orr and his team remained calm, holding the official cash rate at 1% and placing the epidemic in the “downside risks” basket.
Since then, however, the risks have escalated as the outbreak has gained momentum and spread more widely beyond China.
Banks urged to keep lending
Separately, the Reserve Bank has delayed plans to require banks to hold more capital.
Deputy Governor Geoff Bascand said the move had been settled on because the situation surrounding COVID-19 was still “evolving rapidly”.
“To support the availability of credit, the Reserve Bank has decided to delay the start date for increased bank capital requirements by 12 months to 1 July 2021,” Bascand said.
“The negative effects on New Zealand's economy are, and will continue to be, significant. Demand for New Zealand goods and services will be constrained, as will domestic production. Spending and investment will remain subdued for an extended period, while the New Zealand economy's response to the COVID-19 virus evolves.”
The announcement that the cash rate would remain at its new level for a year marks a new move for the Reserve Bank. It has been preparing for the possibility that wholesale interest rates may eventually need to turn negative.
The bank said the decision to cut the OCR so rapidly was unanimous.
The bank said several factors “will continue to assist and support economic activity in New Zealand”, with the financial system remaining sound and major banks well capitalised.
He said: “The Government is implementing expansionary fiscal policy and is keen to increase support through a fiscal package providing targeted and broad-based economic stimulus.
“The New Zealand dollar exchange rate has also fallen as our trading partners' currencies have depreciated.”
At 7:45 that morning, the New Zealand dollar was trading at 59.65 US cents, compared with 60.57 US cents in late New York trading before the announcement.
In the latest Monetary Policy Statement on 12 February, Reserve Bank Governor Adrian Orr and his team remained calm, holding the official cash rate at 1% and placing the epidemic in the “downside risks” basket.
Since then, however, the risks have escalated as the outbreak has gained momentum and spread more widely beyond China.
Banks urged to keep lending
Separately, the Reserve Bank has delayed plans to require banks to hold more capital.
Deputy Governor Geoff Bascand said the move had been settled on because the situation surrounding COVID-19 was still “evolving rapidly”.
“To support the availability of credit, the Reserve Bank has decided to delay the start date for increased bank capital requirements by 12 months to 1 July 2021,” Bascand said.
“Next year, if conditions permit, the Reserve Bank will consider whether a further delay is necessary.”
He added: “We are acting now to help support lending in the economy at a time of considerable uncertainty. The Reserve Bank expects banks to use this flexibility to maintain lending to households and businesses. Banks have substantial buffers above current regulatory minimums, and we encourage them to use these.”
The central bank has put other regulatory reform measures that could be delayed on hold to “ease the burden on financial institutions amid the current uncertainty”. These moves will be announced in the coming days.
Assistant Governor Christian Hawkesby said the bank was “ensuring there is sufficient liquidity in the financial system” through its regular market operations.
“[The Reserve Bank] has a range of operational tools available to support liquidity and market functioning in New Zealand. This has helped domestic cash markets and foreign exchange swap markets continue to function effectively in recent weeks,” Hawkesby said.
“Banks currently have strong liquidity and funding positions to manage short-term disruption to offshore funding markets. We will continue to monitor developments closely and engage regularly with market participants to ensure we are ready to provide support when needed.”
“Deep” recession expected
Last week, share markets fell sharply as concerns about global spreads intensified, prompting efforts to support markets.
Asked about the likelihood of a recession, ANZ chief economist Sharon Zollner said the bank expected it would be “in trouble”.
“We are already seeing a recession; the blow to tourism from travel bans alone is enough to cause one. But I should quickly add that this will hit tourism next month or over the next few months. There are at least two in any case, so the sacrifice may have some significance.”
The Government will work out the details today of a multibillion-dollar package aimed at helping workers, businesses, the healthcare system and society's most vulnerable people.
Details will be announced tomorrow.
The Reserve Bank of New Zealand's announcement comes as two new COVID-19 cases have been confirmed — one in Wellington and one in Queenstown — bringing New Zealand's total number of confirmed cases to eight.
Strict travel restrictions took effect at 1h in the early morning, meaning all travellers arriving from outside the Pacific Islands must now self-isolate for 14 days.
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