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.