Reserve Bank Governor Dr Anna Breman fires another ‘calm down’ shot at markets, as mortgage rates rise

The track suggests the OCR is likely to stay at 2.25% throughout 2026, but there is a slight chance it is cut again at the start of the year, and a slight chance it is hiked at the end of the year.

Breman’s comments to the Herald reiterated the message she delivered in a statement issued on Monday afternoon, aimed at talking the market down.

“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 told the Herald.

“I think it is important that we see a healthy [economic] recovery now and also that that recovery lasts. It’s been three years of very weak growth and we’re just about to get out of that.”

On Monday, Breman moved the market by saying financial market conditions had tightened beyond what the Reserve Bank had intended in its November statement.

By the time the Herald spoke to her on Tuesday afternoon, markets had priced in only two OCR hikes for 2026.

At 2.95%, the two-year swap rate was also about 17bps below where it was before the Monday statement. However, it was still 35bps above where it was before the November OCR cut.

Breman wouldn’t say whether she believed the market had repriced enough to prevent mortgage rates from rising to levels that would stymie the economic recovery, potentially to the extent the Reserve Bank would have to cut the OCR by more than it otherwise would have.

Rather, she emphasised her support for the messaging in the November statement (which was written before she joined the bank).

“I think the forecast ahead for the OCR still holds,” she said.

“The information that we’ve had since the last monetary policy meeting is actually in line with our forecasts from that meeting.”

Breman noted she met her five fellow Monetary Policy Committee members (some remotely), who are collectively responsible for setting monetary policy, before she issued the Monday statement.

She hadn’t yet met them all last Wednesday, when she declined the opportunity to talk the market down during a breakfast with the media.

While she had only been in the role for 10 days at the time, some observers were surprised that meeting the committee members (three of whom are not fulltime Reserve Bank staffers) wasn’t a top priority.

Those worried about the economic recovery, like JB Drax Honore chief strategist for Asia Pacific, Sean Keane, believed Breman would have to say something stronger before the committee next meets on February 18 to talk the market down even more.

However, those who see inflationary risks accompanying the economic recovery, like Bagrie Economics’ Cameron Bagrie, were less concerned about rising mortgage rates.

Noting the lag between the Monetary Policy Committee’s November and February meetings, Breman said she was keen for members to meet eight, rather than seven, times a year.

She said she had already spoken to members about providing more information and nuance in statements, possibly by detailing their individual views.

Breman hoped this would help the market and households better foresee how the committee would react to various economic data releases.

She said the suggestion had gone down well with committee members. However, she wouldn’t put a timeline on when a change could be made, stressing it was important to get it right.

Breman gave a safe answer, referring to the bank’s “flexible inflation targeting regime”, when asked if she would be willing to stomach inflation at the upper end of the Reserve Bank’s 1 to 3% target range if this meant keeping the OCR at a level that really spurred economic growth.

“There are so many things happening in the economy all the time, so keeping inflation exactly at 2% – that would not be a good strategy,” she said.

“It’s just that we want people to know that over time, we will always try to get inflation back to the midpoint of the target range.”

As for one of the Reserve Bank’s other main jobs – maintaining financial stability, Breman said she had no intention of changing the way the Reserve Bank set loan-to-value ratio (LVR) and debt-to-income (DTI) restrictions.

She was comfortable with the way the Reserve Bank limited the amount of mortgage lending banks could do to borrowers with small deposits and low incomes relative to the amount of debt they were seeking.

Breman said it was advantageous that the Reserve Bank both supervised banks and set monetary policy, as the two functions were complementary in some situations.

She recognised the tumultuous year the Reserve Bank had, undergoing a major restructure and losing both its Governor and board chair under controversial circumstances.

While former Governor Adrian Orr was adamant the Government was underfunding the bank, Breman was “very confident” funding was sufficient to enable the bank to deliver on its mandate.

“I can see that even though it’s been a difficult year, there is a lot of energy in the organisation,” she said.

“I’m hoping to be able to travel around the country. I hope that many of my colleagues will also get the opportunity to go out and meet with different parts of society and explain what it is that we do, and also listen to people, so that we also understand the way that their part of the economy is working.”

Breman said she became interested in economics after a large financial crisis in Sweden in the early 1990s.

Asked what drove her in her role, she said, “It’s a job that is interesting. Like my fellow colleagues here at the Reserve Bank, we know that the work we’re doing is important for the economy and we take pride in the work that we do.”

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.