Reserve Bank Governor says there is no pre-set course for monetary policy after Westpac hikes interest rates

She declined the opportunity to explicitly talk the market up or down.

Rather, she stressed a couple of times: “There is no pre-set course for monetary policy.”

Breman said she would look at all the economic data due out before the Monetary Policy Committee next reviews the OCR on February 18.

She said that if circumstances changed, the Reserve Bank would adjust its stance accordingly.

This said, she noted she was yet to meet all the other Monetary Policy Committee members, who collectively set monetary policy.

Breman said the outlook for inflation was “favourable”, as it looked like the rate was moving to the midpoint of the bank’s target range.

She said there were risks to both the upside and the downside.

Asked what she made of Westpac cutting its six-month special mortgage rate, but hiking its two- to five-year mortgage and term deposit rates, Breman said: “We have to look at the overall picture.

“But one way, as an economist, to describe that is to say that some parts of financial conditions have tightened a bit.

“We have to evaluate how that affects the economy – if that’s in line with the transmission we want in monetary policy.

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

There was no major initial market reaction to Breman’s comments being published.

Swap rates remain well above where they were before the Reserve Bank cut the OCR on November 26.

For example, by late-Wednesday morning, two-year swap rates were about 50 basis points above where they were before the OCR was cut.

Breman’s predecessor Christian Hawkesby declined to talk down the market when the Herald interviewed him on November 27.

Asked what he made of swap rates rising, Hawkesby said: “I think we had an awareness of what the market reaction might be to our decision ... We always have our markets team brief us on the likely reactions to different decisions we make. So it sort of fell in the ballpark of what we expected.”

Breman recognised it had been a challenging year for the Reserve Bank.

She underlined her commitment to transparency, saying she would speak to other Monetary Policy Committee members about possibly disclosing their individual views in more detail.

She also said she wanted the Reserve Bank to respond to Official Information Act requests in a timely manner, and release more information proactively.

“I think that trust and credibility is at the core of what central banks do,” Breman said.

“I think it’s very important that we focus on improving and continuously working on having high trust among New Zealanders. I want to stress transparency and clear communication for that reason.”

Breman said she was keen to talk to New Zealanders, and was yet to explore the country beyond Wellington and Auckland.

Before becoming Reserve Bank of New Zealand Governor on December 1, Breman served as the First Deputy Governor of the central bank of Sweden.

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.