New Zealand

New Zealand[NZD]

...

Institutional setup of monetary policy decisions and operations

Policy decision body, size and composition Monetary Policy Committee 1
Major mandates 2 Achieving and maintaining stability in the general level of prices over the medium term; and supporting maximum sustainable employment (Section 8 of the RBNZ Act). Minister of Finance provides a remit to the Monetary Policy Committee with operational objectives. 3
Decision-making process Committee directed to seek consensus in decision making. If consensus cannot be reached, decisions will be determined by a simple majority vote (Governor has casting vote if required). 4
Frequency / length of meetings 7 times a year 5
Frequency of announcements 7 times a year 6
Main policy target Official Cash Rate

Overview of key features

Key policy rate Official cash rate (OCR)
maturity (days) 1
Operating target O/N cash rate
maturity (days) 1
Standing facilities Lending, deposit
Corridor width (bp) Width of corridor 25bps. Floor: OCR -0bps Cap: OCR+25 bps
Reserve requirements No 7
maintenance period N/A
Main operation 8 In the current floor system, there is less need to run open market operations to manage reserves in the banking system. The quantity of reserves is a result of those injected via asset purchases and Term Funding schemes.

RB Bills are still offered at regular intervals as a cash management tool for banks.

RBNZ has recently introduced an additional Standing Repo Facility priced at OCR minus 15bps to assist in absorbing excess liquidity.
functions NA
maturity (days) NA
regular interval NA
frequency NA
Overall frequency NA
Discretion left to operational desk Yes
Key policy signals via
announcement Yes 9
keynote tender
standing facility
other

Monetary policy communication

Explicit use of forward guidance Time-based forward guidance was used for 12 months from March 2020.
3 year OCR rate projection is published in each quarterly Monetary Policy Statement
Timing / media of policy announcement 2pm on the policy decision date
Policy announcement and documents Official Cash Rate and other monetary policy tools (e.g. large scale asset purchases, funding for lending programme) announcement (press release and summary record of meeting 7 times a year: 4 Monetary Policy Statement plus 3 intra-quarter Monetary Policy Review announcements), Monetary Policy Statement document (quarterly release)
Explaining policy decisions Press release and summary record of meeting (every announcement), MPS document (quarterly) plus media conference (quarterly)
Dissemination of minutes (timing / media) Yes, summary record of meeting released with policy decision
Content of minutes Summary of committee discussions and rationale for decision
Publication of forecasts 10 Yes – 3 year ahead publication horizon, for a range of economic variables
Publication of projected path of policy rate 11 Yes – 3 year ahead publication horizon 12

Reserve requirements: ratios and size

Main functions served N/A
Domestic currency N/A
Foreign currency N/A
Average N/A
Required reserves N/A
Required reserve as % of GDP N/A
Actual reserves N/A
Actual reserve as % of GDP N/A

Main features of reserve requirements

Averaging N/A
Carry-over N/A
Type N/A
Maintenance period N/A
end (day) N/A
Calculation period N/A
end (day) N/A
Lag before maintenance N/A
Vault cash N/A
restrictions N/A
Remuneration N/A
average rate N/A
marginal rate N/A
Framework last changed N/A

Liquidity position and forecasting

Structural Position Deficit
Most volatile factor(s) Tax revenue
Most unpredictable factor(s) Tax revenue
Forecast horizon(s) 1 year
Frequency Daily
Frequency of revision Daily
Forecast published? Yes 13

Standing facilities: lending / market ceiling

Name Overnight Reverse Repo Facility
Form Reverse repo (=RP)
Pricing method Official cash rate + 25bp
Maturity O/N
Access limited by/to Collateral; Global Master Repurchase Agreement 2011.
Function(s) Limit interest rate volatility; ensure financial system liquidity

Standing facilities: deposit / market floor

Name Overnight Deposit rate
Form Deposit
Pricing method Official cash rate
Maturity O/N
Access limited by/to ESAS (RBNZ’s RTGS system) account holder
Function(s) Limit interest rate volatility; facilitate settlements; ensure financial system liquidity

Open market operations: repo or reverse repo

Name/Type 14 Repo/RB bills & Reverse Repo
Maturity 1day to 3 months
Frequency As needed
Pricing method Auction
Access limited by/to Registered counterparties
Function(s) Liquidity injection & withdrawal

Open market operations: central bank bills

Name RB Bills
Total issuance $600m, or subject to change relative to market conditions and demand
Maturity 7 & 28 days, or ad hoc if required
Restrictions on possible maturities Up to 6 months
Pricing method Auction
Access limited by/to Registered banks
Discretion left to operational desk Maturity, size and timing

Open market operations: FX swaps

Maturity O/N to 6 months
Frequency As required
Pricing method Bilateral or via broker with counterparties
Access limited by/to Registered counterparties; ISDA
Function(s) Liquidity management and limit interest rate volatility

Other significant liquidity management means

Name/Type 15 1) Standing Repo Facility 2) FX Swaps 3) Term Lending Facility 4) Funding for lending programme.
Form 1) Standing Facility - first come, first served 2) Dealt direct or via broker 3&4) Collateralised lending via individual instituion allocation.
Frequency 1) Daily 2) As required 3) Mature facility rolled annually until 2026 4) Daily until December 2022
Maturity 1) ON and TN 2) Generally 1 day to 3 months 3) 5 years 4) 3 years
Pricing Method 1) OCR minus 15 bps 2) Priced relative to NZD OIS 3) Priced at OCR at time of inception 4) Floating OCR
Access limited by/to Authorised counterparties.
Function(s) 1, 2, 4) Monetary Policy implementation and/or Liquidity management 3) Funding for Crown's Business Finance Guarantee Scheme.

Settlement systems and intra-day liquidity facilities

Settlement system RTGS, since 1998
Intra-day liquidity facility N/A 16
Charge N/A
Foreign currency settlement system No
CLS participation by banks Yes
Other settlement system(s) NZClear - security

Collateral

Standing facilities: List of eligible collateral NZ Government, RB bills, NZ Local Government Funding Agency, Kauris and Securities issued/guaranteed by foreign Governments to A-1+/AA.
Bank securities, Local Authorities, State Owned Enterprises and Corporate securities to A2/BBB-.
Asset backed securities 1-1+/AAA.
RMBS single and two name, and Covered bonds AAA. 17
Standing facilities: Discretion of central bank on collateral 18 No discretion although have ability, to adjust price once limits on bank paper are breached.
Open market operations: List of eligible collateral Same as standing facilities
Open market operations: Discretion of central bank on collateral 19 The operations desk has complete discretion on Governor approved securities. Eligible securities placed in 3 groups – Government or near Government, Bank and other. Typically only accept Government, semi-governnment, Supranational, bank, and RMBS securities are accepted collateral in daily open market operations.

Dissemination of operational information: liquidity forecast

Forecast published? Yes
Channel(s) Reuters, Bloomberg and RBNZ website
Timing Daily: 9.30am (today’s forecast) and 4.00pm (tomorrow’s and next ten working days forecast) on Refinitiv/Bloomberg.
Remarks

Dissemination of operational information: open market operations

Volume and price published? Yes – OMO
Channel(s) Refinitiv, Bloomberg, RBNZ website
Timing Volume:
OMOs – 09:30 on Refinitiv/Bloomberg, 15:00 on website
Results:
OMOs – approx. 10:00 on Refinitiv/Bloomberg, 15:00 on website

Dissemination of operational information: standing facilities

Lending facility usage: Channel(s) Refinitiv, Bloomberg / RBNZ website
Lending facility usage: Timing Daily 09:30 (for previous business day) / Daily 15:00
Deposit facility usage: Channel(s) Refinitiv, Bloomberg / RBNZ website
Deposit facility usage: Timing Daily 09:30 / Daily 15:00

Other information dissemination

Type Bond Lending Facilities
Channel(s) Refinitiv, Bloomberg
RBNZ website
Timing 1) Standing Repo facility: Details at 11.00am; Results at 4..00pm (approx)
2) Bond Lending Facility: Results at 4.00pm
Results 3pm on website (next day for BLF and SRF)

1 The Monetary Policy Committee is responsible for monetary policy decisions taken by the RBNZ. The committee comprises of 7 members, including four internal committee members and three external committee members.

2 Describe as well the legal status of the mandate and involvement of government

3 https://www.rbnz.govt.nz/monetary-policy/about-monetary-policy/monetary-policy-framework

4 https://www.rbnz.govt.nz/monetary-policy/about-monetary-policy/monetary-policy-framework

5 Reserves the right to announce policy changes in between regular announcement dates if needed.

6 Reserves the right to announce policy changes in between regular announcement dates if needed.

7 Banks must maintain a zero or positive balance in RTGS accounts.

8 RP = reversed purchase (repo, inject liquidity), RS=RRP=reversed sale (reverse repo, absorb liquidity), RT=reversed transaction (repo or reverse repo).

9 Via Bloomberg, Refinitiv, Website

10 For instance, economic and inflation forecasts related to policy decision.

11 If applicable, describe the publication of any fan-charts or uncertainty bands around the forecasts/projections.

12 3 year OCR projection horizon has been reintroduced, following a limited period (in 2020/2021) whereby only limited information was produced during the period of uncertainty from the COVID crisis.

13 Daily within RBNZ, and to New Zealand Debt Management Office. The RBNZ advises the financial markets each day of the next day’s expected change in the settlement cash level and for the following two weeks.

14 RP=Reversed purchase (“repo”), RS=RRP=Reversed Sales (“reverse repo”), RT=Reversed transaction (RP or RRP).

15 OT = Outright Transaction, DB = Direct Borrowing, DL = Direct Lending.

16 RBNZ now operates a fully cashed-up system and there is no provision of intraday liquidity.

17 See https://www.rbnz.govt.nz/markets-and-payments/domestic-markets/repo-eligible-securities-and-haircuts

18 Discretion of the central bank to expand collateral types, and list of additional collateral types that the central bank can take on a discretionary basis. Also, additional information such as delays required if discretionary collateral changes.

19 Discretion of the central bank to expand collateral types, and list of additional collateral types that the central bank can take on a discretionary basis. Also, additional information such as delays required if discretionary collateral changes.