'No change': Official Cash Rate stays the same

The Official Cash Rate (OCR) remains at 0.25 percent, the Reserve Bank has announced.

Commenting at Wednesday's Monetary Policy Review, the Reserve Bank Governor Adrian Orr confirmed that the Official Cash Rate hadn't changed.

"The Official Cash Rate (OCR) is being held at 0.25 percent in accordance with the guidance issued on 16 March."

"The Monetary Policy Committee is prepared to provide additional stimulus as necessary. As well as potentially expanding the large scale asset purchase (LSAP) programme, the Committee continues to prepare for the use of additional monetary policy tools as needed," he said in a statement.

The large scale asset purchase (LSAP) programme, currently set at $60 billion, helped to smooth market functioning and reduce the cost of borrowing. The New Zealand Government Bond yield curve had flattened and mortgage and deposit rates had dropped. 

"It remains in the best long-term interests of the banking sector to promptly maximise the effectiveness of our LSAP programme, the statement said.

The assets included are New Zealand Government Bonds, Local Government Funding Agency Bonds, and NZ Government Inflation-Indexed Bonds.

"The Committee is committed to reviewing this quantum at regular intervals, with a focus on achieving its remit."

New Zealand's exit from COVID-19 lockdown and sooner-than-expected move to alert level 1 lifted retail spending and economic activity.  Some trading partners had relaxed restrictions, increasing confidence in demand for domestic exports. Bu given the uncertainty of the COVID-19 pandemic, the positives were likely to be short-lived.

"Current disruptions to supply chains and international travel including tourism will persist and constrain growth and employment," the statement said.

"The exchange rate has appreciated since the May Statement, dampening the outlook for inflation and reducing returns for New Zealand exports."

The central bank said it wasn't clear whether the stimulus delivered so far was enough to meet its mandate, including price stability, maximum sustainable employment, and an efficient financial system.

A broader range of monetary policy tools, including a term lending facility, reductions in the OCR, and foreign asset purchases will be prepared over the coming months.

"As well as potentially expanding the LSAP programme, the Committee continues to prepare for the use of additional monetary policy tools as needed."

The Reserve Bank will provide a monetary policy statement in August.