March 10, 2020 / 5:49 AM / 3 months ago

NZ central bank gov says lower bound for policy could be negative rates

WELLINGTON, March 10 (Reuters) - New Zealand’s interest rates could even go negative before the central bank is forced to think of alternate monetary policy tools, but that couldn’t be ascertained until the economy gets to that point, central bank Governor Adrian Orr said on Tuesday.

Adrian Orr’s comments come after he raised the prospect of using unconventional monetary policy tools in a speech earlier on Tuesday, but said the bank does not need to resort to them just yet.

“We know it could be south of zero, but we won’t know until we are there,” Orr said in an interview when asked about the lower bound for rates before unconventional monetary policy can be introduced.

Orr’s proposed threshold for the use of unorthodox policy contrasts with that of Australia’s central bank, whose governor flagged 0.25% as the lower bound of conventional monetary policy.

Orr said New Zealand has the capacity to response to any economic impact from the coronavirus outbreak.

The Reserve Bank of New Zealand (RBNZ) held rates at a record low of 1% last month.

He did not comment on what the monetary policy committee would do ahead of the next Official Cash Rate (OCR) review on March 25. (Reporting by Praveen Menon Editing by Shri Navaratnam)

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