20 February 2026 – “To achieve our inflation target, we need to look ahead to the future, while learning from the past and understanding the present”, said Reserve Bank Governor Anna Breman in a speech at a Business Canterbury lunch today.
“It takes time for the Official Cash Rate to influence the economy and inflation. Therefore, we base our monetary policy decisions on a forecast of where inflation is heading, and not on where inflation is today. The inflation data is important because it helps us shape the forecast and analyse the drivers of inflation.”
Governor Breman spoke to the current economic situation, as outlined in the February Monetary Policy Statement, as a good example of the need to remain focused on the future. “I want to stress that we are never comfortable having inflation outside our target range. But we must accept what has already happened, understand it, and then look ahead. That’s what our Remit asks of us.”
The time it takes monetary policy to influence the economy and the fact that economic data are often volatile and lagging are good reasons to remain forward looking. In addition, focusing on the future helps financial markets anticipate how the Monetary Policy Committee (MPC) will react to new information about inflationary pressure.
“This allows financial conditions to change in response to new data – in a way that helps us to achieve our mandate – even before the MPC has met to consider the new data and adjust monetary policy,” Governor Breman explained.
Discussing Wednesday’s decision and economic outlook, Governor Breman acknowledged that the path to 2 percent inflation has been bumpy, but that we expect inflation to already be back in our target range in the first quarter of this year. “We are confident that inflation will return to the 2 percent target midpoint over the next 12 months”, she said. Meeting with households and businesses around the country is a good opportunity to get information about how the economy and inflation is evolving.
“That is a positive outlook for 2026. But it doesn’t mean we can put our feet up”, Governor Breman said. “Today’s volatile world only promises to deliver more curve balls. You only have to look at the growth in artificial intelligence and the major shifts in geopolitical relationships to know that the world is changing. The transition is unlikely to be a smooth one.”
“Importantly, being forward focused does not imply that monetary policy is on a pre-set course. We will adjust our plans as we get new information, and always with a focus on the future.”
More information
Download Governor Breman’s speech (PDF, 1.73MB): https://govt.us20.list-manage.com/track/click?u=bd316aa7ee4f5679c56377819&id=ae794fd52c&e=f3c68946f8
Monetary Policy Statement February 2026: https://govt.us20.list-manage.com/track/click?u=bd316aa7ee4f5679c56377819&id=c6ec54e6f8&e=f3c68946f8
