A bold stand: the RBNZ should be reviewing the Official Cash Rate more often, not less.
Economy/news
New Reserve Bank of New Zealand (RBNZ) Governor Anna Breman argues the central bank ought to return to eight OCR assessments each year, rather than the seven it currently conducts. Breman expressed that she believes it’s worth discussing a shift back to eight meetings with her Monetary Policy Committee colleagues, even though she acknowledges there are reasons the change wouldn’t be rapid.
During an interview with RNZ, she stated, “I think having seven meetings—we really have to consider moving to eight meetings per year.” She added that, as the new governor, she intends to bring this topic to the MPC for deliberation, with transparency in mind.
A note from the article’s author: historically, the RBNZ did run eight OCR reviews annually, but about a decade ago the frequency was reduced. I myself argued at the time that the longer gap created an undesirable three-month lull between the last decision of one year and the first of the next. That longer summer hiatus has since proved contentious, given how much conditions can shift in that period, sometimes forcing the Bank to break its usual summer silence.
This week Breman issued an unusually explicit media statement aimed at easing the tighter financial conditions that had developed since the November 26 OCR decision (which Breman did not participate in). That late-year decision lowered the OCR from 2.50% to 2.25, with messaging implying the Bank was done cutting rates for now.
Following that move, wholesale interest rates surged, and some mortgage and deposit rates also climbed.
Breman participated in her first OCR decision on February 18 and quickly determined that waiting too long to speak to markets would be unhelpful amid rising wholesale rates; her current statement has partially mitigated that pressure. She has since given three media interviews this week, including the RNZ discussion.
Earlier this year, the government urged the RBNZ to hold OCR meetings more regularly. The Bank reviewed the issue and, when planning the next OCR cycle extending into 2027, slightly narrowed but did not eliminate the gap, continuing with seven reviews per year.
Breman, who began her tenure on December 1, told RNZ she would not hesitate to issue further statements if needed. She emphasized the importance of transparency:
“Being new in my role, if I comment on monetary policy, I want everyone to have that information at the same time. We’ve seen several years of weak growth and a soft labor market, followed by signs of recovery. With inflation forecast to remain low and stable, it’s crucial to foster sustained growth, strengthen the labor market, and keep inflation in check. That’s why I stressed in my recent statement that the November easing was intended to support growth going forward.”
In an earlier interview with 1News, Breman warned that a sharp rise in wholesale rates could threaten the nascent growth trajectory. She stated, “If tightening persists, we must be vigilant; we don’t want tighter conditions to sap the growth we’re beginning to see.” When asked what factors she weighs, she replied, “The risk that mortgage rate increases could dampen growth is central to my consideration.”
Would you support returning to eight OCR reviews per year, or do you think seven remains the right balance? Share your thoughts in the comments.
