Breman ‘Gifted’ Ideal Economy as She Takes Charge at the RBNZ

(Bloomberg) -- Sweden’s Anna Breman is taking the helm of New Zealand’s central bank at an ideal time, according to the man she’s replacing. 

Breman, who begins her five-year term as Reserve Bank governor Monday in Wellington, inherits an economy embarking on a robust recovery just as inflation tracks back to target, Christian Hawkesby said.

“That is my gift to the incoming governor,” he said in an interview last week after cutting the benchmark rate to 2.25% and signaling the easing cycle is likely over. “I think she’ll do a great job and the economy’s in a great position for someone coming in.”

Previously deputy at Sweden’s central bank, Breman becomes New Zealand’s first female governor and the first foreigner to lead the RBNZ since Englishman Leslie Lefeaux was its inaugural head in 1934. 

She will be tasked with restoring order and stability after a tumultuous year that saw the resignations of a governor and a board chair and questions about the July pause in rate cuts when the economy was stuttering.

Hawkesby acknowledged as much when he said it was time to get the RBNZ off the front pages and “bring back boring.”

After an easing campaign that slashed 325 basis points off the Official Cash Rate since August last year, Hawkesby is handing Breman a more settled outlook. While the jobless rate is at a nine-year high of 5.3%, the economy is projected to grow at close to 3% pace over the coming year and inflation is tipped to slow from 3% toward the RBNZ’s 2% target by mid-2026.  

‘A Dove’

Hawkesby said he had six meetings with Breman ahead of the leadership transition, including one during deliberations for last week’s rate decision. She was not involved in the decision itself, he said. 

In her home country, Breman is viewed as a policymaker open to supporting the labor market and the economy provided it doesn’t create inflation risks, Swedish economists said.

“I would characterize her as a dove,” said Susanne Spector, chief economist at Danske Bank in Stockholm. “I think she has a leaning towards caring more about the economy while of course safeguarding the inflation target.”

The RBNZ is convinced New Zealand is now firmly in recovery mode and will not need any further stimulus. At the same time, the economy has substantial spare capacity to use up, meaning it can expand at a decent clip before generating inflation pressures.

That suggests Breman won’t need to change rates for some time. 

“The Monetary Policy Committee has done its best to set things up so that the OCR is not top of her to-do list,” said Sharon Zollner, chief New Zealand economist at ANZ Bank in Auckland. Barring a significant deterioration in the economic outlook, the next move in rates should be up, though that could be more than a year away, Zollner said.

Bank regulation will likely be the first item in Breman’s in-tray, with the RBNZ due to release decisions from its review of bank capital buffers in December. She must also nurture an institution bruised by a 20% reduction in staffing after the government cut its expected funding. 

Born in 1976, Breman joined the Riksbank in 2019 and was appointed First Deputy Governor in 2022. She holds a PhD from the Stockholm School of Economics and was previously group chief economist and global head of macro research at Swedbank. She has also worked at the Swedish Ministry of Finance and the World Bank.

Her appointment as RBNZ governor marks a deepening relationship between the Riksbank, the world’s oldest central bank, and New Zealand’s inflation-targeting pioneer. 

When the RBNZ was flirting with the idea of negative interest rates at the height of the Covid pandemic, it turned to the Riksbank for advice. Now Breman is expected to usher in transparency reforms at the RBNZ, potentially exporting Riksbank practices such as attributed votes in policy decisions.

“Many have argued that the Riksbank is the most transparent central bank in the world, as well as the oldest, and I tend to agree,” said Jens Magnusson, chief economist at SEB in Stockholm. “Of course it’s hard to say how much of that is because of Breman, but she has certainly contributed and I think she will definitely bring a tradition of transparency with her to the RBNZ.”

Christina Nyman, chief economist at Svenska Handelsbanken in Stockholm, said Breman is always well prepared and known as a good communicator.

Her stint in New Zealand could position Breman well to become Riksbank governor in the future, she said. 

“It’s a very, very good opportunity to be the governor for New Zealand, and then if she comes back she would probably be a very good candidate for being the governor” in Sweden, Nyman said. “We are proud that the Swedish central bank and our governors are highly rated. I’m certain she will be a good governor.”

--With assistance from Charlie Duxbury.

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