1 Jul 2009

Reserve Bank to focus on banking system

8:02 am on 1 July 2009

The Reserve Bank is going to concentrate on making sure banks are operating effectively to support the faltering economy.

In a statement of intent on its plans for the next three years, the Reserve Bank says a focus on the banking system is needed as the economy struggles to cope with the global financial crisis, international recession, and weak domestic spending.

It notes New Zealand has escaped the worst of the crisis seen overseas, though it has pumped extra cash into the financial system through expanding the range of securities it accepts as collateral for loans.

On the economy, the Reserve Bank thinks it will be some time before activity returns to robust and healthy levels.

It says inflation is less of a concern, at least for now.

But the Reserve Bank warns that the massive amount of liquidity that has been pumped into economies by central banks and governments means containing inflation may present a challenge when confidence returns.