Staff of Reuters Read for 2 minutes Reuters, WELLINGTON, July 14 – The Reserve Bank of New Zealand (RBNZ) stunned markets on Wednesday by saying that it would stop buying bonds starting next week, while keeping interest rates steady, pushing the Kiwi dollar substantially higher. The Reserve Bank of New Zealand (RBNZ) left the official cash rate (OCR) at 0.25 percent, but from July 23, it suspended additional asset purchases under its Large Scale Asset Purchase (LSAP) program. The operation of the Funding for Lending Program (FLP) remained unchanged. In a Reuters survey, economists predicted the RBNZ to keep rates unchanged, although majority did not foresee any modifications to stimulus measures at this meeting. “The RBNZ today delivered a hawkish signal by announcing the end of its bond purchases starting next week, although we only expected it in August,” said Marcel Thieliant, Senior Australia and New Zealand Economist at Capital Economics. Following the announcement, the New Zealand currency surged 0.8 percent, eventually settling at $0.7012. In a statement, the RBNZ said, “The Monetary Policy Committee resolved to reduce the current stimulatory level of monetary settings in order to accomplish its consumer price and employment objectives over the medium term.” A dramatically improved economic outlook, along with rising capacity pressures and inflation, has driven economists to move forward their expectations for a rate hike in recent weeks, with some predicting a boost as soon as the end of the year. The RBNZ hinted at an increase in September 2022 during its May meeting, but Governor Adrian Orr insisted the bank would only consider tightening policy if its inflation and employment targets were fulfilled sustainably. The Reserve Bank of Australia (RBA) announced earlier this month that no rate hikes are expected until 2024. (Praveen Menon contributed reporting, and Richard Pullin edited the piece.)/n
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