Central Banks and Communication - RBNZ

By Sophia Rodrigues

The Reserve Bank of New Zealand lifted the OCR by 25bps to 2.75% and flagged the OCR may need to rise further.

At the media conference, Governor Anna Breman stressed "it's likely there may be a future OCR increase, but the timing is highly uncertain," adding that the RBNZ is not on a preset course.

There is no argument the OCR track points to 25bps hike in December, but that's a path and not a commitment from the RBNZ.

Assistant Governor Karen Silk said in an interview with Bloomberg, “We were quite clear that conditional on the outlook, we do think that there’s likely to be a need to increase rates further from here,”
“Whether it’s October or whether it’s December is still open, but the way the track is situated it’s more likely the latter rather than the former.”

The language suggests the RBNZ is more likely to hike in December than October. However, that contradicts Breman, who made it clear the timing is "highly uncertain."

Silk should have said the OCR track points to a December hike, and stopped there. Saying the next hike is more likely to be December than October (even if it's based on the track) is specific forward guidance. The kind of guidance Breman was avoiding.

Subtle but big difference. And that's what communication is all about, and one I watch very, very closely.