OCR decision reached ‘relatively quickly’, Reserve Bank’s Anna Breman says in face of doubters

Friday, 10 July 2026

Reserve Bank governor Anna Breman has defended the bank’s decision to raise the Official Cash Rate against the backdrop of a still-weak economy by stressing the weight it puts on the perils of inflation.

But in an interview with The Post, Breman also stressed the uncertainties over the outlook for interest rates, saying it was too soon to make a call on whether that had been significantly changed by the resumption of hostilities in the Middle East.

“What we've seen over the past few months is quite a lot of resilience in the global economy to these severe shocks,” she said.

When it raised the OCR by 25 basis points to 2.5% on Wednesday, the bank’s monetary policy committee described “some further reduction in monetary stimulus” as likely, but the timing of future rate rises as highly uncertain.

Read more:

• Reserve Bank lifts OCR to 2.5%, more rate rises likely but timing ‘highly uncertain’

• ‘I'm pro-growth’: Why Kiwibank’s Jarrod Kerr opposes OCR rise

• More wind, less rain: Strongest El Niño yet will leave parts of North Island vulnerable to wildfire

Doubling down on the difficulty of making predictions in the current environment, Breman said she felt it was “important for us to stress any further withdrawal of stimulus is uncertain”.

“We don’t want to be too decisive of the coming meetings, because there are so many things happening in the global economy.”

The interest-rate track that the Reserve Bank published in May indicated that the OCR would reach 3% by early next year.

But Breman declined to label it as still the best guide to the bank’s thinking, describing it instead as “its latest” OCR track, and emphasising developments since then.

The chief economists of ASB, Kiwibank and Westpac had forecast the Reserve Bank would keep the OCR on hold this week, with Kiwibank’s Jarrod Kerr arguing the bank should have given the economy more time to recover.

But Breman said the six members of the Reserve Bank’s monetary policy committee had converged on their decision to raise the OCR “relatively quickly”.

The underlying difference between economists arguing for or against a rate rise was “probably how we see inflation and how we judge that will affect growth”, she said.

“For us, we know that inflation is hurting people and we know that getting back to low and stable inflation is also good for the growth of the labour market.”

As well as noting the potential for the Middle East crisis to take a turn for the worse, the bank’s monetary policy committee gave a nod to the economic threat posed by a “super El Niño” this summer, in the records of its Wednesday meeting.

Meteorologists are warning that the severity of the weather event, which often brings droughts to the North Island and can disrupt agricultural production worldwide, could be the strongest on record.

“For us risks on the upside currently are worse than risks on the downside, but both are clearly there,” Breman said, commenting on the possible impacts on inflation.

The traditional role of central banks has been to use interest rates to accelerate or put the brakes on economic activity in way that smooths out the highs and lows of inflation and unemployment.

Despite the increased frequency of sudden shocks to the economy, which have included Covid, the Ukraine war, the Middle East conflict and which may now be added to by El Niño, central banks still had to “look at the business cycle”, Breman said.