New Zealand central bank says policy path not preset, guided by inflation outlook

[WELLINGTON] New Zealand’s top central banker said on Wednesday (Dec 10) that there was no preset course for monetary policy and that adjustments would be made if the outlook for inflation changed.

Reserve Bank of New Zealand Governor Anna Breman, who stepped into the role last week, told reporters that the monetary policy committee was keeping a close watch on all incoming data, including inflation and growth numbers.

“I’d like to stress that there is no preset course for monetary policy,” she said.

“It’s really important to see that we have a forward-looking policy rate path that’s being published... but it’s also important to stress that, of course, if circumstances change, if we get new data that shows that the economy and inflation is going in a different direction from what we expected, we will adjust the monetary policy,” she added.

New Zealand’s central bank cut the official cash rate by 25 basis points to 2.25 per cent at the end of November and signalled an end to the easing cycle.

It has forecast the cash rate will remain on hold over the coming year, but markets have moved to price in more than two hikes in 2026. Breman said some financial conditions had tightened “a bit” and the monetary policy committee had to evaluate how that affected the economy.

“Right now our focus will be to see how this affects households and firms and businesses and if that is in line with economic developments that we are expecting,” she said.

Breman added that while there had been some encouraging signs the economy was recovering, it was important to look at data to see that improvement was confirmed “while still maintaining the focus on keeping inflation low and stable.”

Third-quarter inflation

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New Zealand’s third-quarter inflation stood at 3.0 per cent, at the top of the central bank’s target band of 1 per cent to 3 per cent. The central bank previously said it expects inflation to come down due to spare capacity in the economy.

Breman said the central bank “would maintain a laser focus on (its) core mandate” of low and stable inflation. REUTERS