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Heading into the Reserve Bank of New Zealand (RBNZ) monetary policy decision due to be announced this Wednesday, the New Zealand Institute of Economic Research (NZIER) Monetary Policy Shadow Board continues to favor the expansion of the quantitative easing (QE) program to adopting negative interest rates for additional stimulus.

Key quotes

“Fewer Board members see further quantitative easing as appropriate over the coming year.“

“Although an expansion of quantitative easing remains more favored than a negative OCR in stimulating the economy, there has been an increase in appetite amongst Shadow Board members to introduce a negative OCR over the coming year.”

“Some Shadow Board members continue to highlight their skepticism about the effectiveness of a negative OCR in stimulating the economy.”

Market reaction

Despite dovish RBNZ expectations and risk-off mood, NZD/USD stays well bid above 0.6750.

The spot continues to benefit from the country’s lowering of the coronavirus alert level to 1 while the Chinese central bank keeps the interest rates on hold.

At the press time, NZD/USD gains 0.16% to trade at 0.6771.