Reserve Bank Governor Dr Anna Breman says New Zealand’s economic outlook is evolving broadly as expected, with growth beginning to recover and inflation still on track to return to target.
In media interviews this week, Breman discussed monetary policy settings as outlined in the November Monetary Policy Statement, noting that the document provides a clear assessment of economic conditions and inflation risks.
Although she was not involved in the preparation of the November statement, Breman said it remains a strong foundation for understanding current policy settings.
She said: “One of my priorities as Governor is to promote understanding of our role and decisions.
“This is especially important at this time given that I have only recently joined the MPC and assessed recent data.”
She added that the policy decision and balance of risks were well articulated in the committee’s summary record.
Breman said recent data continues to align with the Monetary Policy Committee’s expectations.
She said: “We continue to see signs that growth is recovering after having stalled in the middle of this year. The labour market is still weak but is expected to recover as demand in the economy strengthens.
“We remain confident that annual headline consumers price index inflation will decline towards the 2% target mid-point by the middle of next year.”
She reiterated that the forward path for the Official Cash Rate published in November indicates a small probability of another rate cut in the near term.
However, she said that if conditions evolve as expected, the OCR is likely to remain at its current level of 2.25% for some time.
Breman also noted that financial conditions have tightened since the November decision, beyond what is implied by the central OCR projection.
Breman said the Reserve Bank is closely monitoring wholesale interest rates and their impact on households and businesses.
She said: “Ahead of our next OCR decision in February, we will continue to assess incoming data, financial conditions, and global developments, and implications for New Zealand’s economic outlook and our medium-term inflation objective.”
She reiterated that monetary policy is not on a preset course, noting that the committee meets seven times a year to review the latest data and forecasts.