As I'm sure this audience will know, the Reserve Bank has important duties and functions regarding financial stability in New Zealand. These include the issue of notes and coins, the prudential supervision of banks, the operation and oversight of payments systems, the provision of liquidity to the financial system, and the role of lender of last resort to the financial system.
This need for policy optionality has implications for the transition out of the Pandemic Emergency Purchase Program, the PEPP, which is likely to come to an end in March 2022. Here, we face two challenges related to the PEPP’s dual purpose. First, there’s the PEPP’s monetary stance role. The program was designed in part to counter the downward impact of the pandemic on inflation.