New Zealand’s central bank is
studying ways to regulate banks that may limit interest-rate
increases when credit or asset bubbles emerge, Governor Alan Bollard said.
The so-called macro-prudential instruments that target
liquidity ratios or other areas of bank balance sheets “can
possibly help to moderate credit cycles,” Bollard said in a
speech to a banking conference in Sydney today.
The Reserve Bank of New Zealand was criticized by exporters
after it raised the official cash rate to a record in mid-2007
to counter a housing boom that was fanning inflation. The
nation’s currency surged as foreign investors were attracted to
rising yields, curbing returns from overseas sales.
“We do need to keep preparing for how we might deal with
credit and asset booms when they recur in the future,” Bollard
said. “We have identified several tools that we would
contemplate using in the right circumstances.”
Still, the central bank expects to use such tools
“infrequently” and they shouldn’t be seen as a “panacea” for
imbalances in the economy, Bollard said.
“We should keep our expectations modest,” he said.
To contact the reporter on this story:
Tracy Withers in Wellington at
twithers@bloomberg.net
To contact the editor responsible for this story:
Stephanie Phang at
sphang@bloomberg.net
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