Fed's Daly: There are two possible paths for the economy

Thank you for the warm welcome and the opportunity to speak with you today. I always find it valuable to meet with businesses and hear directly from you about the New Zealand economy. In times of high uncertainty, it is more important than ever. Today, I am going to talk about the ongoing conflict in the Middle East and how it could impact the outlook for the New Zealand economy. We are likely to see higher headline inflation over the near term, and somewhat weaker growth momentum. I want to acknowledge the uncertainty and hardship that many households and firms are experiencing at this difficult time. Importantly, I’d like to emphasise that the Reserve Bank is well positioned to handle the challenges to our price stability and financial stability mandates. On financial stability, there is a risk that global financial stability risks could emerge and affect the cost and availability of funding for New Zealand banks. However, recent stress testing suggests that banks are resilient with strong capital and liquidity buffers, and are well-placed to weather severe geopolitical shocks. Domestically, the most likely concerns for financial stability are around the resilience of borrowers, and squeezed profitability for businesses. We expect that banks will work with customers experiencing hardship, and support them through this difficult and uncertain time. On monetary policy, we have the tools to ensure that inflation remains at our 2 percent target midpoint over the medium term. The Official Cash Rate (OCR) is now at 2.25 percent after a series of rate cuts. Headline inflation is slightly above the target range, but core inflation has been steady at 2.4 percent for some time.3 We are at the early stages of an economic recovery. Inflation expectations over the medium term remain well anchored, RBNZ'S GOVERNOR BREMAN: WE'RE WELL-POSITIONED TO HANDLE CHALLENGES TO OUR PRICE STABILITY AND FINANCIAL STABILITY MANDATES CAUSED BY THE ONGOING CONFLICT IN THE MIDDLE EAST RBNZ GOV BREMAN: NZ ECONOMIC RECOVERY IN EARLY STAGES, ECONOMY STILL OPERATING BELOW CAPACITY; EXPECTS HIGHER NEAR-TERM INFLATION & WEAKER GROWTH ... RBNZ'S GOVERNOR BREMAN: MONETARY POLICY CAN AND SHOULD ENSURE THAT A TEMPORARY INFLATION SPIKE DOES NOT TURN INTO ENDURING INFLATIONARY PRESSURES

The Australian private sector ended the first quarter of 2026 in contraction, according to the latest flash PMI® data by S&P Global. The reduction in activity was the first for a ...