By Lucy Craymer and Renju Jose
WELLINGTON, Dec 17 (Reuters) – New Zealand’s top central banker said on Wednesday the official cash rate was likely to remain low through next year, countering markets that have priced in two rate hikes in the coming year.
Reserve Bank of New Zealand Governor Anna Breman told the New Zealand Herald newspaper on Tuesday that the cash rate track in the bank’s November statement “still holds”.
That suggests rates will stay at 2.25% throughout 2026, though there are chances it could cut again at the start of next year and hike at the end of the year.
“I think there is a risk that if mortgage rates rise quickly that households will see that and be more cautious than maybe they need to be,” Breman said.
“I think it is important that we see a healthy (economic) recovery now and also that recovery lasts. It’s been three years of very weak growth and we’re just about to get out of that,” she added.
The comments come after the governor released a statement to the markets on Monday noting that financial markets had tightened beyond what was implied by the central projection of the official cash rate forecast, and it was likely to remain at its current level for some time.
The tightening in the market had seen a number of banks move mortgage rates higher.
Breman told Radio New Zealand in a second interview on Wednesday that she released the statement because she believed it was important the market understood that the forecast was different from the market reaction.
“There is still a small probability, but it’s still a probability, that we’ll do another rate cut in the near term,” she said noting both GDP and inflation data would come out before the next monetary policy meeting in February.
Breman added that she would like to see the central bank move to eight meetings from its current schedule of seven meetings because there is quite a long gap between the November and February meetings.
(Reporting by Lucy Craymer; Editing by Lincoln Feast.)
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