In December 2020, it launched its Funding for Lending Programme (FLP). The programme was aimed at giving banks a source of funding to help them keep mortgage and deposit rates low.
The Reserve Bank has lent banks $16b of newly printed money at the OCR via this scheme, which is due to end next month.
The Reserve Bank, in a just-published five-yearly review of its monetary policy, quantified the effects of these programmes, which were novel for New Zealand.
It concluded all the money printing was equivalent to a cut in the OCR of around 90 basis points.
All else being equal, it estimated this increased annual consumer inflation by around 0.5 percentage points and reduced the unemployment rate by around 0.3 percentage points. It cautioned these estimates don't capture "the significant cumulative effects" of money printing.
Annual consumer inflation came in at 7.2 per cent in the September quarter, meanwhile the unemployment rate was 3.3 per cent.
The Reserve Bank said there was "little evidence" that having a "higher monetary base" thanks to money printing contributed towards inflation.
Rather, it was the downward pressure that money printing put on interest rates that caused inflation.
Specifically, the Reserve Bank estimated the FLP shaved around 15 basis points off mortgage and term deposit rates.
"While pass-through from funding costs to mortgage rates appeared slow, and the transmission channel involves some uncertainty, mortgage rates likely declined by 10 to 20 basis points over time due to the FLP," it said.
As for the LSAP programme, the Reserve Bank said it put "significant downward pressure on government bond yields and the exchange rate".
It noted that on the day it launched its LSAP programme, 10-year government bond yields fell by 52 basis points.
The two subsequent extensions to the programme the Reserve Bank made saw yields fall by 11 and 4 basis points.
It noted these "announcement-day effects" align with what happened in other countries.
The Reserve Bank's analysis comes as the cost of the LSAP programme has been making headlines.
The $55b of bonds the Reserve Bank bought via the programme have fallen in value by $9.5b, thanks to higher inflation and therefore interest rates changing market conditions.
The loss will be realised as the bank spends the next five years selling down its bond portfolio to normalise the size of its balance sheet.
The Reserve Bank, in its review, reiterated that one should look beyond this direct cost and consider the wider impacts of its LSAP programme.
Most notably, it said the programme successfully soothed dysfunction in the bond market.
It also helped the Government issue a lot of debt at low rates during a period of heightened market uncertainty and dysfunction.
It estimated the Government saved around $3.3b in interest costs on the $67b of debt it issued in 2020 and early 2021.
The Reserve Bank said the downward pressure the LSAP programme put on interest rates would also have lifted consumption, employment and incomes – "all of which contribute to higher government tax revenue and/or lower welfare spending". It didn't attempt to put numbers on this broader impact.
Taking a step back, the Reserve Bank recognised it should have started lifting interest rates sooner than it did. This way, inflation would be lower than it is.
As for the FLP, the Reserve Bank concluded, it could've been designed to give the bank more flexibility.
For example, it could've included a clause that said the Reserve Bank could end the programme early if economic conditions changed.
Indeed, the Reserve Bank is being criticised for keeping the programme in place for the two years it said it would keep it there for, despite inflation becoming a major problem.
