Image: Riksbank.
Anna Breman as the next RBNZ Governor from December 01.
The big news in central bank land is today's appointment of Swede Anna Breman to the top job at the Reserve Bank of New Zealand (RBNZ).
Initial economist reactions confirm her to be a welcome choice who will provide a steady steer for the central bank, but for the currency, the appointment offers scant relief.
"NZD unchanged as markets continue pricing near-term cuts; medium-term risks remain into 2026," is the initial reaction from Standard Chartered to the appointment.
The NZD is the world's third-biggest lose in the G10 currency complex, indicating a distinct underperformance, particularly given the bottom slots are held by the two North American currencies, which are subject to a major devaluation push from the White House.
The kiwi is struggling as ongoing economic underperformance means the central bank will likely cut more and further than peer central banks in the coming month. And when we consider that the RBNZ was first to cut rates in the current cycle, we get the sense that the currency has been prone to a significantly 'dovish' central bank.
Will Breman change that? No, is the initial answer from economists. In fact, Standard Chartered's view is that she could continue to pursue a 'dovish' policy path next year.
"There is little scope for immediate repricing of the rate path, given the timing of her arrival. However, we remain wary that the NZD could become more vulnerable going into 2026, when her tenure will shape how the RBNZ will likely balance between weak growth and the need to preserve inflation credibility," says Nicholas Chia, FX Strategist at Standard Chartered.
Breman currently serves as the First Deputy Governor of Riksbank, where on several occasions she supported easing when the medium-term outlook suggested inflation would return to target.
She most recently voted for a cut, even after acknowledging that inflation had come in higher than anticipated.
On her unveiling today, she said the RBNZ will "be laser focused on low, stable inflation."
The consensus amongst economists is that her appointment won't stand in the way of a 'dovish' trajectory in RBNZ policy, a trajectory that is weighing on the Kiwi.
That stance is warranted by the performance of New Zealand's economy, which unexpectedly shrank 0.9% in the second quarter, representing a substantial miss on the -0.3% consensus estimate. The outcome prompted the market to raise odds of further RBNZ rate cuts, promptly suppressing the NZD.
Sharon Zollner, Chief Economist at ANZ, said Breman's appointment won't alter the path of monetary policy, as the central bank's function is clearly codified in its charter and operational framework.
Although she could influence the tone, and other aspects of RBNZ business, Zollner says ultimately the direction of travel will be determined by the economy.
"We can’t pigeonhole the new Governor as hawk, dove, or kōtoku. In fact, it would be a bit of a worry if we could pin down the Governor in such a way, as any permanent bias held by anyone on the Monetary Policy Committee could lead to costly outcomes for the broader economy," says Zollner.
ANZ thinks the RBNZ will cut the OCR by 25bps in both October and November.
The next RBNZ meeting is on October 8 and markets price 27% odds of a jumbo 50bps cut to 2.50%.
"The RBNZ projects the policy rate to bottom at 2.50% by year-end. However, the steeper downturn in New Zealand Q2 real GDP opened the door for additional easing towards the lower end of the RBNZ neutral range estimate (between 1.60% and 4.20%)," says Elias Haddad, Senior Markets Strategist at Brown Brothers Harriman.
"In the short-term, NZD/USD is at risk of breaking below its 200-day moving average (0.5841) on a firmer USD and more dovish RBNZ," he adds.