New Zealand central bank chief sees risks to economy, inflation

New Zealand's top central banker, Anna Breman, cautioned on Tuesday that persistent rises in oil prices could lead to inflation exceeding earlier forecasts, while noting the country's economic recovery faces notable risks. Speaking in Dunedin, Breman stated that the economic rebound was anticipated to intensify and widen, propelled by exports and a slow rise in household spending.

She acknowledged the challenging context, as evidenced by recent surges in global oil prices and longer-term interest rates. Breman warned that if these oil price increases continue, they may cause a modest uptick in inflation in the near term compared to what the bank had initially anticipated in the September report.

At the September policy meeting, the Reserve Bank of New Zealand increased its key interest rate by a quarter of a percentage point to 2.75%. However, the bank projected a more measured pace of future rate hikes than many financial markets had anticipated. Breman also projected that consumer price inflation would decelerate slightly to 3.9% in the September quarter from 4.1% the previous quarter.

The central bank reaffirmed that it would scrutinize incoming data and global developments before its next rate decision in October, and would maintain focus on medium-term inflation prospects. October 28 saw the RBNZ convene, with market expectations suggesting a 75% likelihood of another rate hike, pushing the rate to 3%.