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NZIER’s Shadow Board still favour QE over negative OCR for stimulus

Contributor:
Fuseworks Media
Fuseworks Media

We are continuing to seek our Shadow Board members’ views on whether the Official Cash Rate (OCR) should be negative and if the Reserve Bank should expand its quantitative easing (QE).

Fewer Board members see further quantitative easing as appropriate over the coming year. This follows the Reserve Bank’s decision to expand its Large-Scale Asset Purchases (LSAP) programme up to $100 billion at the August meeting.

Although an expansion of quantitative easing remains more favoured 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.

The Reserve Bank has indicated in its recent communications it is actively preparing to introduce a negative OCR and a Funding For Lending programme next year if required. The central bank is aiming to reduce interest rates to encourage households and businesses to spend and invest.

Nonetheless, some Shadow Board members continue to highlight their scepticism about the effectiveness of a negative OCR in stimulating the economy.

Figure 1 Fewer Shadow Board members think further QE is required

(% strength of policy preference on what the RBNZ should do for each monetary policy tool)

Source: NZIER Monetary Policy Shadow Board

To read a copy of the full Shadow Board release, click here.

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