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According to strategists at UOB Group’s Quarterly Global Outlook, the likeliness of another round of QE by the RBNZ should not be ruled out just yet.

Key Quotes

“Encouragingly, the RBNZ has been quick to react in the current environment. On 23 March, policymakers announced that it would conduct large-scale asset purchases of New Zealand government bonds (NZGBs) “to provide further support to the economy, build confidence, and keep interest rates on government bonds low”. The RBNZ will purchase NZD30bn worth of NZGBs across the yield curve in the next 12 months, because “financial conditions have tightened unnecessarily over the past week.” They have also said that they stand ready to “make adjustments and additions if needed.”

“The latest move follows on from the RBNZ’s provision of significant additional liquidity, and freeing up of bank capital (of around NZD47bn by delaying the imposition of tougher bank capital requirements by a year). More importantly, the RBNZ in an emergency and bold move on 16 March – lowered the OCR by 75bps from 1.00% to 0.25%. It gave explicit forward guidance, committing to keep the OCR there for at least 12 months. Our view is that it will remain there even longer.”

“Depending on how the current financial market situation develops, more QE may be required down the road, perhaps buying other assets, or aimed at facilitating lending to certain segments. We strongly believe the RBNZ will be watching this space very closely.”