The Reserve Bank of New Zealand (RBNZ) has entered a new era of monetary policy communication under Governor Paul Breman. In a historic shift, Governor Breman held his inaugural post-Monetary Policy Statement (MPS) press conference, marking a decisive departure from the bank's traditional document-only approach. This move introduces a new layer of real-time accountability and clarity, aligning the RBNZ with global central banking practices like those of the Federal Reserve and the European Central Bank.
The press conference followed the RBNZ's widely anticipated decision to maintain the Official Cash Rate (OCR) at 5.50% for the seventh consecutive meeting. Governor Breman emphasized that current restrictive settings are appropriate to continue guiding inflation back to the bank's 1-3% target band. The decision reflects a cautious approach following the most aggressive tightening cycle in decades, which saw the OCR rise by 525 basis points between October 2021 and May 2023.
During the conference, Breman outlined the Monetary Policy Committee's (MPC) data-dependent framework, focusing on inflation persistence, labor market conditions, and global economic developments. He stressed that policy would remain restrictive until the committee gains confidence that inflation will settle sustainably within the target range, with reduced inflation expectations and better alignment between economic demand and supply.
Key topics addressed included persistent domestic (non-tradable) inflation, which remains elevated at 5.3% annually, and services inflation linked to a tight labor market. The governor noted that while imported inflation has decreased, domestic pressures continue to present challenges. The unemployment rate has risen from historic lows of 3.2% to 4.5%, with wage growth showing signs of moderation.
Experts like Dr. Anika Sharma, a central bank communication specialist, hailed the new communication strategy as a tool to reduce market volatility by providing immediate, authoritative clarification. Financial markets reacted moderately, with the New Zealand dollar strengthening approximately 0.4%. Interest rate futures suggest markets anticipate potential rate reductions beginning in late 2025 or early 2026, contingent on continued inflation moderation.
