Reserve Bank of New Zealand is the central bank of New Zealand, founded in 1934 which is wholly owned by the Government of New Zealand since 1936 with the aim of maintaining the stability of the country’s financial system. The financial sector is constantly innovating and finding ways to use technology to improve its processes and services. The currency of New Zealand is called the New Zealand dollar, sometimes referred to as the “kiwi”. RBNZ is responsible for formulating monetary policy to maintain price stability and for promoting the maintenance of a good and efficient financial system.

In this article we will look into the role of the central bank on New Zealand (RBNZ Role) in detailed.

Role of RBNZ

• Main responsibilities of the RBNZ are to issuing the country’s currency the New Zealand Dollar (Kiwi). Maintaining foreign currency reserves.
• Regulating private and public banks, insurers and non-bank depositors such as credit unions. This includes overseeing the broader operations of banking institutions and the overall financial system.
• The RBNZ designs the monetary policy framework in the country aimed at maintaining price stability.
• The Bank is responsible for implementing effective payment methods for overseeing and operating the payment systems within the country.
• Providing the Annual Report, Annual Accountability Document to the Minister of Finance within three months of the end of the fiscal year.
• Beginning of each fiscal year RBNZ provides a Statement of Intent (SOI) to the Minister of Finance. This document outlines the way the RBNZ intends to operationally carry out its duties over the following three years.

Monetary Policy Tools of RBNZ

Monetary Policy Statement: The Reserve Bank publishes Monetary Policy Statement (MPS) quarterly. Reserve Bank uses monetary policy to control inflation and keep it within a specific target band. The policy generally outlines how the central bank intends to achieve the specific target.

RBNZ Rate Statement: It is the primary tool used by the central bank to communicate with investors regarding their monetary policy.  It contains the outcome of the vote on interest rates, discusses the economic outlook and offers clues on the outcome of future votes. 

Forward Guidance: It refers to information provided by the central bank about future policy settings. The purpose of the forward guidance is to attempt to influence the financial decisions of investors, businesses and households. This is done by providing guidance on the expected path of interest rates.

Official Cash Rate (OCR) : It is the interest rate which is set by the RBNZ. The purpose is to meet the dual mandate specified in the Remit to the Monetary Policy Committee. The OCR influences the price of borrowing money in New Zealand. As such, it provides the RBNZ with the ability to influence inflation and the level of economic activity. 

Interest Rate Swaps: The RBNZ enters interest rate swaps as a way to reinforce forward guidance and reduce market interest rates. Interest rate swaps and bank bills make up the benchmark commercial bank liability yield curve.

How can you trade economic reports?

The NZD pair reacts to the Employment (Quarterly employment change), PMI (Monthly PMI Report), Inflation, GDP, Central Bank meeting and Minutes of it and trade report (Monthly balance trade – Difference between imports and exports). The traders can watch and predict the reports using our economic calendar make trade with using Winstone Prime trading platform MT4 and MT5.

Economic reports can be traded in 2 ways.

Proactive trading: Trade is made before the announcement, trying to predict the economic data and the direction of the pair.

Reactive trading:  Trade is made after the announcement and using technical analysis following the release sentiment.

Conclusion

The above information is designed to provide a broad overview of the structure of the New Zealand financial system and its responsibilities on the Country’s economy. The Reserve Bank regulates banks, insurers, and non-bank deposit takers for the maintenance of a sound and efficient financial system. The Reserve Bank also plays a significant role in promoting financial and economic education, and regularly releases various publications, videos and activities explaining financial concepts. And the most important thing is that the NZD is the 10^th most actively traded currency and the NZDUSD the 9^th most actively traded pair. It’s accounting for 2% of the global currency trade volume, an exaggerated share of the size of the country’s economy.  So grab the benefits of Reserve Bank of New Zealand meetings and Minutes and execute it in your trade. If you already have a trading account with us enjoy the RBNZ minutes or else Open your trading accoun with Winstone Prime.