Though it wasn’t the first time, and not among the majors, still New Zealand’s Reserve Bank (RBNZ) earlier this week found itself unable to complete a full QE operation. The monetary authority had recently gone back to quantitative easing because it complained about rising bond yields in the country’s government bond market. Higher rates, it is claimed, threaten economic recoveries.
To alleviate the speculated defect, a central bank purchasing the offending bonds – driving up their price therefore their rates down – seems the perfect antidote. After all, the entire premise of QE is reducing interest rates.
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