At its second monetary policy meeting scheduled for this year, the Reserve Bank of New Zealand (RBNZ) decided to leave the official exchange rate (OCR) unchanged at a record low of 0.25% in May.
The New Zealand central bank is expanding the size of the quantitative easing (QE) program, matching expectations of an increase to around NZD 60 billion.
In a surprise move, instead of meeting on March 25, the Reserve Bank of New Zealand (RBNZ) set its official cash rate at 0.25% on March 15 during an emergency meeting. At this meeting, Governor Adrian Orr said that the board of directors does not envisage negative interest rates.
What followed after a week was the announcement of QE, with NZGB NZD 33 billion of different maturities on the yield curve over the next 12 months.
About the RBNZ Interest Rate Decision
RBNZ Interest Rate Decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook for the economy and increases interest rates, it is positive, or bullish, for the NZD.
NZD / USD reaction
The NZD / USD climbed to almost 0.6100 in an instinctive reaction to the announcement of the expansion of the RBNZ QE, but then turned around to drop more than 0.50% to 0.6040. The kiwi central bank kept rates at 0.25% as expected. The central bank also left the door open for further rate cuts and negative rates.