Quantitative easing not right for New Zealand, Bollard says

Thursday 30th April 2009

Reserve Bank Governor Alan Bollard has ruled out printing money to lift the New Zealand economy out of its first recession in a decade.

Bollard said he doesn’t believe quantitative easing will address the issues facing the New Zealand economy, which hasn’t “experienced the same extreme falls in economic activity” as a number of its trading partners, he told a media conference today.

The central bank has investigated a range of “orthodox and unorthodox” measures after it embarked on its steepest easing policy since the inception of the official cash rate ten years ago. Bollard slashed rates a further 50 basis points to a record-low 2.5% and still has more room for further cuts than his counterparts in the US and UK

“We’ve done some thinking, but we’re not going to need them at the moment,” Bollard said, referring to the prospect of the central bank printing money.

“I’m unsure if quantitative easing is effective” in addressing the issues of a tightening market in New Zealand.

Central banks adopting unorthodox measures to ease monetary conditions became a reality when the Bank of England created 75 billion pounds to buy government bonds in March, after it cut its benchmark rate to 0.5%.

The Federal Reserve followed suit later that month when the Federal Open Market Committee agreed to buy US$300 billion of long-term Treasuries within six months.

The FOMC decided against increasing its purchases of government debt and mortgage securities when it reviewed its benchmark rate yesterday. The Fed held the target range for rates at zero to 0.25%.

Businesswire.co.nz

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