RBNZ plan supports short-term rates at par with official cash rate

NEW Zealand’s central bank said on Monday financial institutions may deposit the local currency with it in exchange for nominal government bonds to keep short-term interest rates at par with the bank’s official cash rate.

The central bank, which delivered its sixth straight interest rate hike last week, added the facility would allow institutions to lend New Zealand dollars overnight and “from tomorrow to the next day, on a secured basis.”

It added that it was introducing the standing repo facility as the Reverse Bank has noted some instances where short-term market rates have trade below the official cash rate (OCR).

“The purpose of the Standing Repo Facility is to help anchor short-term market interest rates near the OCR,” it said. REUTERS