Latest / Best of Business / Brad Olsen: Infometrics Principal Economist on the possibility of the OCR going up later this year

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Brad Olsen: Infometrics Principal Economist on the possibility of the OCR going up later this year · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks'd be follow
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  Speaker 2: So there is a warning that interest rates could start
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  Speaker 2: rising as early as May. The warnings come from Inframetric
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  Speaker 2: Sprad Olson, and he's with us. Happy New Year, Brad,
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  Speaker 2: same to you here that Okay, Now, let me see
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  Speaker 2: if I've got this right. You still think most likely
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  Speaker 2: it starts rising in November, but there's an outside chance
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  Speaker 2: it starts rising as early as May.
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  Speaker 3: Yep, that's broadly correct. At the moment, we think the
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  Speaker 3: conditions will come through this year. That means that yes,
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  Speaker 3: interest rates will have to rise, but not sort of
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  Speaker 3: as quickly. But we've sort of highlighted this potential around
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  Speaker 3: May just because after that inflation figure that came out
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  Speaker 3: on Friday, we've had a lot of questions from people saying, well,
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  Speaker 3: you know, how quickly might things have to adjust? And look,
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  Speaker 3: I've had a few people in the business community go, well,
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  Speaker 3: does this mean that the February monetary policy statement from
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  Speaker 3: the Reserve Bank do they have to you know, whipsaw
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  Speaker 3: around that quickly. And that's why we've just wanted to
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  Speaker 3: highlight that, No, it won't have to happen that quick.
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  Speaker 3: You'd need even stronger can continue data to come through
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  Speaker 3: before the Reserve Bank would make such an abrupt change,
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  Speaker 3: and the earliest you'd probably have enough data to sort
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  Speaker 3: of convince yourself as the bank that they need to
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  Speaker 3: move quicker would be made. So that's sort of the
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  Speaker 3: start of the bookcase, if you will, and then going
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  Speaker 3: all way through the end of this year in terms
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  Speaker 3: of potential. But at the moment it does look like
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  Speaker 3: it's more that latter half. Regardless though expectations are clearly
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  Speaker 3: starting to become earlier than everyone expected in terms of
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  Speaker 3: those interest rate hikes, and that's only on the official
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  Speaker 3: cash rate. Actual bank rates for longer term mortgages have
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  Speaker 3: already started an increase a touch already this year.
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  Speaker 2: How much of your prediction factors in the fact that
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  Speaker 2: Anna Brennan is reasonably hawkish, Well, in.
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  Speaker 3: A sense, we've sort of taken a fairly neutral view
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  Speaker 3: there because we haven't heard her speak very directly on
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  Speaker 3: New Zealand data and what that means of her observations
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  Speaker 3: of the economy and inflation. But we'll hear a lot
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  Speaker 3: more of that sort of come February and we will
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  Speaker 3: adjust our views then, But I think probably most importantly,
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  Speaker 3: when heither of you've seen inflation outside the target band
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  Speaker 3: and the Reserve Bank not starting to have to get
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  Speaker 3: going a bit quicker, and probably realistically this view reinforces
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  Speaker 3: what we were saying in at least October, if not earlier,
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  Speaker 3: that further interest rate cuts below three percent really did
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  Speaker 3: start to create an uncomfortable spot where we're probably going to,
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  Speaker 3: as we've done the last couple of years, keep overdoing
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  Speaker 3: this sort of either stimulus or the contraction that comes
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  Speaker 3: from in the economy to try and get us on
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  Speaker 3: an even keel. And I dare suspect that if we
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  Speaker 3: look back at last year's changes, we probably should have
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  Speaker 3: stopped at three because all of those interest rate cuts
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  Speaker 3: after that they haven't hit the economy yet. And if
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  Speaker 3: we're already at three point one percent, it does make
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  Speaker 3: me uncomfortable that that inflationary pressure is already more intense
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  Speaker 3: than anyone would like it.
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  Speaker 2: Brad, it's good to talk to you, I suppose, despite
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  Speaker 2: the topic. Thank you very much, Brad Olsen Informetric's principle economists.
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