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RBNZ isn't here to surprise, deputy governor says

Friday 9th August 2019

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Reserve Bank deputy governor Geoff Bascand has told an audience of businesspeople the central bank won’t keep surprising as it did when it slashed the official cash rate on Wednesday. 

RBNZ's monetary policy committee shocked financial markets by slashing the OCR by 50 basis points to a record low of 1 percent. Economists had been expecting a 25 basis point cut. 

In Auckland today, Bascand told about 80 Bank of New Zealand customers at a lunch that the bank is not in the business of surprising people and prides itself on being as transparent as possible. 

Bascand was responding to an audience participant who queried whether businesspeople should now be preparing themselves for more drama from the central bank. 

“We pride ourselves on being transparent. We publish forecasts and projections and, as much as possible, talk about how we see the world unfolding," Bascand said, referring to the very fact he was giving the speech being part of its transparency.  

“We are not in the business of surprising people, we are in the business of doing what we think needs to be done to achieve our objectives,” he added.  

“So I don’t think you should interpret this as some sort of change in philosophy, but a correction, and we will try and keep communicating as much as we possibly can. World interest rates are lower and we are behind with all this uncertainty.”

When asked how close the policy committee's call was, he noted the word “debated” was used in the summary of the meeting and that the decision was reached by consensus. 

“You can’t be scared of surprising the market," he said. "It's not something we want to make a pattern of, but you can’t let it hinder us from what we need to do. We can’t just deliver what the market expects."

Yesterday, governor Adrian Orr downplayed concerns depositors would be hard hit by the rate cut and told Parliament’s finance and expenditure select committee that investors need to put their money to work better. 

ANZ had said it was concerned about the impact of lower rates on savers and it was reviewing deposit rates, while Westpac had warned the move may stoke house price inflation. 

(BusinessDesk)

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