UPDATE 1-New Zealand central bank withdraws some liquidity facilities as conditions improve
(Add official quote, background)
By Praveen Menon
March 10 (Reuters) – New Zealand’s central bank on Wednesday said it would cut some temporary liquidity facilities it had put in place during the COVID-19 pandemic, due to improving market conditions .
The Reserve Bank of New Zealand (RBNZ) announced that it would phase out the forward auction and open market operations (COMO) facilities, which allowed banks to borrow money in exchange for qualifying corporate and asset-backed securities.
“Financial market conditions have improved considerably since March 2020, when these facilities were introduced and the use of these special facilities has been very low over the past six months,” said Vanessa Rayner, Head of Markets financials at RBNZ.
RBNZ’s quantitative easing program, its term loan facility and a financing program for loans for banks have already resulted in a significant increase in liquidity and lower financing costs for banks, the bank said. .
The decision to remove these facilities will not affect the bank’s stance on monetary policy, Rayner added.
The New Zealand dollar and government bonds have rallied in recent weeks amid speculation about an earlier end to stimulus measures and a move towards higher interest rates.
The central bank, however, has sought to temper market speculation, saying it is in no rush to tighten monetary policy. (Reporting by Arundhati Dutta in Bengaluru; Editing by Shinjini Ganguli and Jonathan Oatis)