Reserve Bank governor, Anna Breman. Photo: RNZ / Supplied
Economists say the Reserve Bank governor is sending a clear message to financial markets they have gone too far in raising fixed mortgage rates over the past week.
Anna Breman, barely two weeks into the role, took the unusual step of issuing a statement about current financial conditions which had gone "beyond" the RBNZ's recent projection for interest rates.
"Financial market conditions have tightened since the November decision, beyond what is implied by our central projection for the OCR."
She repeated that the forward path for the official cash rate (OCR) published in the November Monetary Policy Statement (MPS) indicated a possibility of another rate cut in the near term.
"However, if economic conditions evolve as expected the OCR is likely to remain at its [ https://www.rnz.co.nz/news/business/580066/official-cash-rate-cut-to-2-point-25-percent
current level of 2.25 percent] for some time."
"As always, we are closely monitoring wholesale market interest rates and their effect on households and businesses."
Breman said the RBNZ would look at incoming data, financial conditions, and global developments, as it worked towards its next interest rate decision in February.
Independent economist Cameron Bagrie said banks were also looking at the numbers and were coming to the view that rates would rise next year.
"There's a little bit of calm your farm, cool your jets."
"Financial markets don't tend to align themselves with what the Reserve Bank is saying 100 percent of the time, financial markets tend to push a little bit further in either direction."
"They were a little bit south of the Reserve Bank when interest rates were going down now they've decided to go a little bit north of the Reserve Bank in regard that the next move looks like it's going to be up."
Bagrie said the same trend of second guessing and moving ahead of central banks was apparent in other economies around the world, including Canada and Australia.
He said it was a little bit of jawboning, but markets were anticipating a rate rise next year to counter any inflation pressures arising from a recovering economy.
BNZ senior strategist Jason Wong said wholesale interest rates had moved lower after Breman's comments.
"The market took the view that Breman was sending a clear message of some discomfort with the post November MPS market reaction, which had seen rates sharply higher."
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