New Reserve Bank (RBNZ) Governor Anna Breman is highlighting the importance of understanding how harmful and hurtful high inflation is, while noting there's no pre-arranged course for monetary policy.
Speaking to media on Wednesday morning 10 days into the job, Breman discussed a wide range of issues.
Heading into 2026, the RBNZ will be keeping a close eye on all incoming data, and watching what develops globally to see how that could affect the New Zealand economy, she said.
“I would like to stress that there is no pre-set course for monetary policy,” Breman said.
While it’s important to have a forward-looking policy rate plan published, it’s also important that if circumstances change, if there’s new data showing inflation and the economy is going in a different direction from expected, then the RBNZ would adjust its plans, she said.
“In this current environment when there’s been a lot of turbulence over the past few years, it’s important for households, [financial] markets and businesses to understand how we will act when we get that new information.”
In technical terms, Breman said “sometimes we talk about the reaction function of the monetary policy committee and that’s what I want to stress right now.”
“We are are looking for where is inflation headed and to assess where inflation is headed, we need to look at the overall development of the economy, all the new incoming data, inflation expectations, transmission of monetary policy so that they understand that we will adjust to ensure that we meet the mandate,” Breman said.
“I think it’s very important to understand how harmful and hurtful high inflation is."
Asked about her relationship with Finance Minister Nicola Willis and what she would like to see from her in the new year, Breman said she looked forward to having a professional working relationship with the Finance Minister.
Breman said it was important to think of fiscal policy as the job of the Minister.
“Here at the Reserve Bank, we focus on our core mandates - low and stable inflation, financial stability and the payment system.”
With her continual emphasis on the mandate, Breman said it was important that everyone understood the role of the Reserve Bank in the New Zealand economy.
“I think I’m simply doing it to stress where our focus will be and I’m also doing it because we’ve seen over the past few years how hurtful high inflation is, how much it harms households and businesses."
“It erodes purchasing power. Volatile inflation is very complicated for small businesses to handle as well. So I’m focusing on that because this is what we are expected to achieve - inflation within the target range, focusing on the midpoint.”
"You want an economy that has lower, stable inflation because it helps to foster prosperity for all New Zealanders,” Breman said.
Economic growth was important but the central bank’s tools are set up to focus on low and stable inflation, she said, which will promote growth and a strong labour market.
Comfortable with RBNZ independence
With an election next year Breman said she was very comfortable the RBNZ has strong independence.
“The Monetary Policy Committee has a lot of integrity. We know what the mandate is and we will work to ensure that we reach that mandate.”
Asked about potential shocks that could sideswipe New Zealand, Breman said: “I think it’s important to have preparedness for all eventualities, which is almost impossible of course.”
“But if we get too focused on one thing, there might be something else that’s really important … There are risks we have to consider but we have two tasks. One is to analyse and prepare for these kinds of event affecting the economy and the other is preparing for it in terms of our operational resilience.”
“I think the main thing is to keep looking at all the different things that are happening in the global environment and looking at the analysis of how will this affect the New Zealand economy."
Breman said: “That is really key for us. What is happening with trade, what’s happening in other areas and how do they translate into economic developments in New Zealand for households and businesses.”
Mortgage rates & housing
Asked about her thoughts on Westpac NZ increasing fixed home loan rates, Breman noted wholesale market interest rates had risen.
“My understanding is that the shortest variable rates have followed downwards after the rate cuts but the longer dated mortgage rates have gone up."
“We have to look at the overall picture but one way as an economist to describe that is to say that some part of financial conditions have tightened a bit and we have to evaluate how that affects the economy if that’s in line with the transmission that we want in monetary policy.”
Breman said the RBNZ’s focus will be to see how this affects households, firms and businesses and if that is in line with economic developments they’re expecting.
Property is very important for households and small businesses, Breman said, and it was something that affected how the economy evolves.
“We’ve seen very low levels of constructions of new homes over the past few years and that’s been a drag on growth. We don’t have a mandate in terms of house prices but of course, we very carefully follow developments in the housing market and how that affects the overall health of the economy.”
Comfortable with prudential regulation
Asked how she would conduct prudential regulation having come from The Riksbank which primarily focuses on monetary policy, Breman said in her previous role, the Swedish bank had a mandate for monetary policy, financial stability and the payment system.
“Some of the work on financial stability policy that we were doing was also closely related to some of the prudential side,” Breman said.
“We didn’t have responsibility for the prudential side but we were in a group collaborating between the Financial Supervisory Authority who had that mandate, the Debt Office who had their solution and the central bank who were doing work on financial stability."
“So I feel very comfortable working with prudential supervision at the Reserve Bank.”
When asked by a reporter if she would be comfortable if a future government broadened the mandate (for example, putting employment back into it), Breman said it was important to respect the democratic process.
The RBNZ would always do what is mandated in legislation, she said.
Breman said she did not have a preference for a single mandate.
Breman, who was previously the First Deputy Governor of Sweden’s central bank, had her appointment first announced at a press conference with Willis in September.
Her first public appearance was at Parliament’s Scrutiny Week where she spoke to the Finance and Expenditure Committee last week, making it clear the bank would be “laser focused” on their core mandate.
‘Very orthodox’
Reflecting on Breman’s first appearance in its Market Outlook report on Monday, BNZ’s head of research Stephen Toplis said “it was quickly apparent that her approach to monetary policy will be very orthodox”.
“Namely, monetary policy is all about keeping inflation near to target. Everything else is secondary and/or a means to an end. And she provided clarity as to why this must be so.”
Toplis said Breman shouldn’t be pigeonholed as being either a hawk or a dove.
“She is likely to be hawkish if inflation threatens to rise too far and dovish if there’s not enough of it. You also get the sense that Breman’s approach will be cautious and considered rather than activist.”
Toplis said he expects the Governor to be more focused on international developments than many of her predecessors.
“In a small open economy, such as New Zealand’s, what is happening offshore is of paramount importance."
“But we caution that ‘the world’ through the eyes of a New Zealander can be a very different place to ‘the world’ as seen from Europe. Also, there are times when New Zealand does seem to plot its own course," said Toplis.
One of the Governor’s first jobs? Choosing her deputy
Before taking charge of the Reserve Bank in December, Christian Hawkesby who was the Deputy Governor with responsibility for Financial Stability, was temporarily acting RBNZ Governor.
He left the bank on November 30 and his departure leaves a vacancy on the Monetary Policy Committee.
Toplis said it will be one of Breman’s first jobs as Governor to decide who her Deputy Governor will be, who will be Assistant Governor for Financial Stability (Angus McGregor is currently acting in this role), and who in the RBNZ will join the Monetary Policy Committee.
“The same person could fulfil all these roles but there is no requirement for this. One assumes existing staff will play some part in providing guidance about these appointments.”
Breman has hit the ground running, Toplis said, and is “well advanced on the New Zealand learning curve”.
“From here on in, that curve will get steeper. We’ll look forward to seeing where it ends up when the February 18 Monetary Policy Statement is delivered.
“All things going to plan, at least the Governor might have the luxury of a period of Official Cash Rate stability to gently ease into her new role.”
6 Comments
Sounds to me like she will be a hawkish Governor.
That's her role, of which she is being very clear about. Very refreshing compared to the silly dual mandate they had to try and balance from 2018 given they were conflicting, and inflation should always be their sole mandate IMO.
Most other reserve banks can do it.
Inflation should be their main mandate, but realistically they already have an implied dual mandate, why not make it formal where economy is a secondary concern? For example if I was governor right now I would have kept the OCR around 4% unless CPI had gone under 2%, because its not my job to give a toss about the economy, jobs, etc. The fact its been cut to 2.25% when CPI is at 3% and growing can only be because the RBNZ does give a toss about the economy and jobs, they imply it into their mandate because it would be stupid not to.
Orr is it all squawk?
She is 100% correct.
It is acidic to the unemplyed and retired on govt limited income. More are retired every day and nearly all retired vote. Hopefully this manifests as more normal interest rates, so the stupidity of gambling it all is less subsidized by everyone else.
“I think it’s very important to understand how harmful and hurtful high inflation is."
no kidding….try renting, building or buying a house
the last twenty years of inflation targeting has been a disaster for the country socially
would we not have been better to include house prices in the inflation figures? maybe we should have had interest rates a few percent higher
when I see foreigners getting posts like this and at the FMA I do wonder how much of it is due to corruption
Oh well here’s hoping for $3 a kilo tomatoes and a hundred thousand dollar lift in the house equity over summer
any news on a royal commission into housing?
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