Reserve Bank of New Zealand Governor Wheeler speaking the BIS conference on cross-border financial linkages

  • FX rate rises in Asia have generated difficult headwinds
  • Changes to FX regimes, capital controls not the answer
  • Says macroprudential tools may help address stability concerns relating to housing
  • Says loan limits allowed delay in rate tightening
  • LVR limit to be removed when housing eases

The full text of his speech: Cross-border financial linkages: Challenges for Monetary Policy and Financial Stability

On a related issue, you’d think the RBA would have paid attention to the RBNZ macroprudential tools and susbsequent developments in the housing market in New Zealand.

More (via Bloomberg):

  • Limits on low-deposit lending have reduced house price inflation, credit and the spending associated with wealth effects
  • Impact on CPI inflation pressures is same as a 25-50 bps increase in official cash rate
  • Reduction in housing pressures has allowed a delay in tightening, “thereby reducing the incentive for any additional capital inflows into the New Zealand dollar in search of higher yields”
  • Limits are not permanent and will be removed once housing market pressures have moderated and RBNZ is confident there will not be a resurgence of house price inflation