The central bank is expected to release details of the tool on Wednesday
While the Reserve Bank of New Zealand (RBNZ) is likely to hold the official cash rate (OCR) at its current level this week, details of a new stimulus tool could still signal a gradual shift to negative rates in 2021.
Adrian Orr, governor of the RBNZ, is expected to keep the OCR at its current 0.25% rate and maintain the bank’s quantitative easing programme when the central bank releases its Monetary Policy Statement on Wednesday.
Read more: Mortgage rates could drop further with negative OCR next year
However, economists also expect the RBNZ to unveil details of its Funding for Lending programme (FLP), which was first hinted at in September and provides retail banks with funding to allow them to lower their interest rates for consumers.
In a recent Reuters poll, economists said that the FLP could be key to the RBNZ bringing the OCR down into negative territory next year.
“In our view, the odds of a negative OCR have reduced, and the implementation of the FLP could see a negative OCR implemented later or more gradually,” Sharon Zollner, chief economist at ANZ, told Reuters.
Meanwhile, Dominick Stephens, chief economist at Westpac, told Reuters that the bank “still expects the RBNZ to cut the OCR below 0% next year, but at a more gradual pace than the ‘big bang’ cut we had factored in previously.”
The central bank’s latest statement comes as the country comes to grips with an unemployment rate that increased to 5.3% in Q3 from 4% in Q2.
