The Reserve Bank of New Zealand (RBNZ) surprised the market in the Asian session by announcing that it would end its bond -buying program next week.
At the latest policy meeting this morning, the central bank said the purchase of additional assets under the Large Scale Asset Purchase (LSAP) program would be stopped on July 23, 2021.
The announcement apparently shocked the market and pushed the New Zealand dollar to soar higher above the price level of 0.7000 against the US dollar.
Meanwhile, the interest rate was maintained at 0.25% and the Funding for Lending Program (FLP) operations were also unchanged.
Policymakers say that some monetary stimulus remains needed but its level could be reduced to minimize the risk of not meeting the central bank’s mandate.
In addition, they reiterated that there would be short -term spikes in inflation in the second and third quarters, amid natural factors such as high oil prices, or temporary factors such as supply shortages and higher transportation costs.
Policymakers agree that more persistent consumer price inflationary pressures are expected to increase over time.
In addition to that, the RBNZ also said that recent data readings showed the economy was still strong despite being impacted by continued international border restrictions.
