RBNZ governor’s unscheduled message had impact only ‘at the margins’
Tuesday, 16 December 2025
Reserve Bank governor Anna Breman’s attempt to cool financial markets and dissuade more banks raising retail interest rates further only appears to have had an impact “at the margins”, ASB chief economist Nick Tuffley says.
Breman said in an unscheduled statement on Monday that financial market conditions had tightened since the central bank’s last monetary statement in November “beyond what is implied by our central projection for the Official Cash Rate”.
The comments were taken by the market as a clear signal the Reserve Bank believed markets had got carried away in assuming the Official Cash Rate (OCR) would soon rise from its current level of 2.25%.
The move came after some banks began hiking rates, most notably ANZ which increased its longer-dated fixed-term mortgage rates by between 20 and 30 basis points.
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The two-year swap rate — a measure of future interest rate expectations — fell 10 basis points soon after Breman’s statement at 3pm yesterday, and by this morning it had slipped by a further three basis points to 2.99%.
But Tuffley said that needed to be put in the context that the rate had been 2.59% before the Reserve Bank issued what was regarded as a markedly hawkish monetary policy statement in November, when it signalled it expected the OCR would remain unchanged until 2027.
“So we’re still a good 40 basis points higher.”
The market was still virtually pricing in two 25 basis point hikes in the OCR by the end of next year, which would take the key interest rate to 2.75%, he said.
“It’s taken a little bit of the edge off, but we’re still up substantially.”
Tuffley stopped short of suggesting the bank would be disappointed by the scale of the impact of Breman’s comments, but believed market rates were “still on the higher side of what they ideally would like”.
Given the bank had not unanimously voted for a rate cut last month, there had since been some strong economic data, and the Reserve Bank had “passed up some previous opportunities to talk the market down, you’re not going to see a reversal of what’s happened”, he said.
BNZ research head Stephen Toplis doubted the bank would be unhappy with the market reaction to Breman’s comments.
“Whether it’s the extent of what they wanted or not, who knows? It’s been noticed by markets, which is a good start.”
The Reserve Bank shouldn’t have been surprised by the market reaction to its November statement “given the nature of the commentary they produced” at the time, he said.