New RBNZ Governor Anna Breman Addresses Financial Market Shift

Newly appointed Reserve Bank of New Zealand (RBNZ) Governor Anna Breman has indicated her commitment to transparency regarding economic conditions. In a recent interview with Corin Dann, presenter of RNZ’s Morning Report, Breman discussed the tightening of financial market conditions, which she believes have exceeded the RBNZ’s projections for interest rates.

Just a day after her appointment on December 1, 2023, Breman issued a statement highlighting concerns over financial market adjustments. She noted that conditions had tightened since the bank’s decision in November, which had lowered the official cash rate (OCR) to 2.25 percent. “Financial market conditions have tightened since the November decision, beyond what is implied by our central projection for the OCR,” Breman stated.

Breman emphasized the importance of aligning market expectations with the bank’s economic assessments. “I thought it was reasonable for markets to see how I read the economic data,” she explained, referencing the gap between the RBNZ’s forecasts and market reactions. Although she refrained from declaring whether the market’s outlook was accurate, she acknowledged the slim possibility of another rate cut in the near future.

More economic indicators, including GDP and inflation numbers due in January, will significantly influence the RBNZ’s decisions leading up to the next monetary policy meeting. Breman expressed her desire to ensure that all stakeholders receive timely information. She remarked, “Given I am new in my role, if I comment on monetary policy, I do want everyone to have that information at the same time.”

Breman, previously the First Deputy Governor of Sveriges Riksbank, shared insights from her experience with monetary policy during the COVID-19 pandemic. While New Zealand pursued an elimination strategy, Sweden opted for a more relaxed approach. She recounted the dire economic circumstances faced during the pandemic, stating, “We saw the economy almost in free fall.”

Reflecting on the current state of the New Zealand economy, Breman noted a trend of weak growth and a struggling labor market, but expressed optimism about recovery. “We are starting to see the economy recovering,” she said, adding that it is crucial to maintain low and stable inflation while fostering lasting growth.

Access to cash also remains a priority for Breman, who highlighted the RBNZ’s research indicating that approximately 80 percent of adults in New Zealand use cash occasionally. “It is very important that people still have access to cash,” she insisted, citing the necessity for financial inclusion and crisis preparedness. She referenced instances, such as recent cyclones, where access to cash proved critical.

Breman’s proactive approach and emphasis on communication reflect her readiness to navigate the challenges ahead as she settles into her new role. As the RBNZ prepares for the next monetary policy meeting, her leadership will be closely watched by both markets and policymakers alike.

For the full interview, viewers can tune into RNZ on Wednesday morning or visit rnz.co.nz for more updates.