The market welcomed the Reserve Bank of New Zealand (RBNZ) decision to keep the interest rate unchanged at 0.25% and the NZ $ 100 billion large-scale asset purchase (LSAP) program at a policy meeting for the November session.
In addition, the RBNZ also introduced new additional stimulus to the economy to meet inflation and employment targets through the NZ $ 28 billion Financing for Loans (FLP) Program starting December. FLP will reduce bank financing costs and lower interest rates.
Meanwhile, the central bank expects a steady increase in the unemployment rate as the economy adjusts to the current situation and inflation is also forecast to remain below target for some time.
New Zealand has received worldwide praise for its success in curbing the spread of coronavirus which allows the economy to reopen after a few weeks of closure.
However, with international borders likely to continue to close, the RBNZ predicts a contraction in two consecutive quarters in December and March.
RBNZ Governor Adrian Orr, who spoke after the central bank's decision, said that domestic and foreign economic activity since August was seen as more resilient than previously expected.
Following the central bank's decision, the New Zealand dollar soared to a 20-month high and rose further after Governor Adrian Orr said interest rates would remain at 0.25% until next year.
Governor Orr's latest statement certainly brings relief to investors who are seen not to implement negative interest rates in the near future.
