The Reserve Bank of New Zealand has left its bond buying programme unchanged at NZ $100 billion and its Official Cash Rate (OCR) unmoved at 0.25 percent, but signalled it would bring forward a programme of cheap lending for banks to before the end of 2020.

The central bank had previously suggested its ‘Funding For Lending’ (FLP) programme would happen in tandem with a cut in the OCR to below zero percent from March next year, but it said its Monetary Policy Committee members had agreed they could be decoupled to accelerate fresh stimulus.

“Members noted staff advice that deploying an FLP before the forward guidance period for holding the OCR ends could provide additional stimulus to the economy sooner. Having an FLP in place earlier would provide certainty to financial institutions planning their funding needs, and speed up the transmission of the programme by allowing banks to replace funding as it matures over time,” the bank said.

“The Committee agreed that providing term funding at rates near the OCR via an FLP would lower the financial system’s funding costs, and therefore borrowing costs for firms and households, and support the availability of credit to the economy. The effectiveness of the programme would be influenced by the degree to which financial institutions passed on their funding cost declines to their customers. Members agreed that they preferred to launch an FLP before the end of 2020,” it said.

The RBNZ also noted banks were on track to be ready for negative interest rates by year end.

“Members agreed with the previous assessment that a lower OCR would be complementary to its other monetary policy tools, and that it was prepared to lower the OCR to provide additional stimulus if required,” it said.