The Monetary Policy Committee (MPC) of the Reserve Bank of New Zealand quite expectedly decided to maintain the Official Cash Rate unchanged earlier today. The near-negative interest rate was thus kept at 0.25 per cent for the seventh consecutive time.
Similarly to the monetary policy stances that were already adopted by the RBA and BOE, New Zealand's central bank also decided to scale up its asset purchasing programmes this quarter. Interestingly enough, the only notable exceptions to this global trend were the ECB and FED, which opted to remain vigilant until December.
The MPC of the RBNZ cited the need for extra liquidity as a necessary tool to cushion the growth of unemployment and induce inflation within the desired target range.
"The Monetary Policy Committee agreed to provide additional monetary stimulus to the economy in order to meet its consumer price inflation and employment remit. The Committee agreed that the additional stimulus would be provided through a Funding for Lending Programme (FLP), commencing in December. The FLP will reduce banks’ funding costs and lower interest rates."
Judging by the remaining policy remarks of the Committee, the extra liquidity is needed largely to curtail the fallout from the pandemic stemming from the remaining uncertainty. Namely, the unpredictable and likely uneven road to recovery.
A policy intervention at the present rate is justified, given the massive spike in unemployment in Q3. This is the worst performance of New Zealand's labour market on record since the last quarter of 2016.
Despite some welcoming news concerning Pfizer and BioNTech's developmental vaccine, which could be the real game-changer the world has been waiting for in the fight against COVID-19, the MPC validated growing concerns that logistical problems with distributing the vaccine could prove to be a major obstacle.
Meanwhile, the New Zealand dollar continued its rally against the greenback following the monetary policy decision of the RBNZ. As can be seen on the 4H chart below, the kiwi is steadily climbing further north.
The NZDUSD pair recently broke out above the upper boundary of the ascending channel and also above the major resistance (currently support) level at 0.67900. The latter was established during the formation of the previous Double Top pattern.
The MACD indicator underscores the robust bullish momentum in the market at present; however, if a bearish correction were to emerge next, it is highly unlikely that it would fall below the above-mentioned support level.