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Anna Breman: Reserve Bank Governor explains why OCR increase was necessary · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks at b
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  Speaker 1: Follow this and our wide range of podcasts now on iHeartRadio.
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  Speaker 2: Good afternoon. The Reserve Bank has raised the official cash
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  Speaker 2: rate by twenty five basis points to two point five percent.
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  Speaker 2: It is the first rise in more than three years,
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  Speaker 2: and there is a warning it is not the first.
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  Speaker 2: There is more to come. Reserve Bank govern Governor Anna
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  Speaker 2: Bremen is with us now.
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  Speaker 3: Hi Anna, Hi, Hi Haber.
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  Speaker 2: So is this basically down to the ongoing inflation caused
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  Speaker 2: by the Iran war?
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  Speaker 3: This is due to high inflection over a long period
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  Speaker 3: of time that is hurting households. So inflation eats up
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  Speaker 3: purchasing power, and getting inflection back down will actually make
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  Speaker 3: sure that houses get the purchasing power back, they can
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  Speaker 3: spend more, We get more demand, and we will see
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  Speaker 3: better growth and employment coming back.
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  Speaker 2: I know it was a unanimous decision, but was there debate?
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  Speaker 2: Did anybody have to be convinced?
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  Speaker 3: There was a bitter debate, and there should be debate,
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  Speaker 3: but it was the unanimous decision.
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  Speaker 2: Did anybody have to be convinced?
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  Speaker 3: I wouldn't say convinced, but I would say that we're
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  Speaker 3: looking at different arguments, and that is important because we
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  Speaker 3: need to have diversity of thought on the Monetary Committee,
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  Speaker 3: and we do have that.
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  Speaker 2: The argument that Jered Kerr has made against rising the
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  Speaker 2: OCR today was that there are significant numbers of people
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  Speaker 2: who are still suffering with the cost of living and
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  Speaker 2: this is just going to make it worse them. Did
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  Speaker 2: you guys consider.
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  Speaker 3: That We considered all aspects, and the thing is that
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  Speaker 3: high inflation is what's hurting them, and our job is
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  Speaker 3: to bring inflation back towards target while still considering not
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  Speaker 3: causing any unnecessary volatility in output. That's how you know,
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  Speaker 3: our kind of formal remit is written. And we see
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  Speaker 3: now that growth is stronger, and we see it rebounding
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  Speaker 3: really well now when oil prices and fuel prices are falling.
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  Speaker 3: So we think that it was the appropriate balanced response
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  Speaker 3: at this time to get inflation back, purchasing power back
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  Speaker 3: by hiking the OCR twenty five business points. And we're
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  Speaker 3: still supporting growth because it's still stimulatory. The OCR is
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  Speaker 3: still at a relatively low level.
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  Speaker 2: Is the economy growing faster than you actually expected?
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  Speaker 3: It actually seems to be so. And there's two things here,
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  Speaker 3: because we got data showing that prior to the conflict,
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  Speaker 3: growth was actually a little bit stronger than we thought.
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  Speaker 3: We got data both for the first quarter of this
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  Speaker 3: year but also revised backwards, so we see that, you know,
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  Speaker 3: we're actually a little bit of a higher level when
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  Speaker 3: we went into the conflict, and then we saw growth
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  Speaker 3: slowing down, and now we're seeing it resuming, and we've
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  Speaker 3: got some good signals that it is picking up, especially
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  Speaker 3: the exporting sector. And what's holding it back is things
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  Speaker 3: are more related to households. But houses are suffering from
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  Speaker 3: the high inflation. So we need to get that inflation
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  Speaker 3: down so they get the purchasing power back, because then
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  Speaker 3: will also expect better growth broader in the economy.
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  Speaker 2: I mean, is it fear to say that you aim
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  Speaker 2: in neutral here somewhere around three percent.
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  Speaker 3: Well, the thing is that we're saying that we think
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  Speaker 3: that two point twenty five was still stimulatory and that
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  Speaker 3: we're gradually removing some of this, but we cole stimulatory
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  Speaker 3: monetary policy and moving towards neutral, then we are and
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  Speaker 3: we should be a little bit uncertain exactly what is neutral.
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  Speaker 3: It's probably around three percent. It could be a little
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  Speaker 3: bit lower, could be a little bit higher. And now
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  Speaker 3: we're going to and that's what we said. You know,
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  Speaker 3: if we do further withdrawal of stimulus, it will depend
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  Speaker 3: on what the data looks like, and we will learn
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  Speaker 3: more about what is neutral the more data we get
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  Speaker 3: over the coming months or so.
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  Speaker 2: And I can I take it from what you said
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  Speaker 2: today that you are concerned the AI bubble is going
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  Speaker 2: to burst.
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  Speaker 3: I think we wanted to point out things in the
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  Speaker 3: global economy that could both means that growth could actually
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  Speaker 3: be better or worse than expected. And we see that
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  Speaker 3: some countries are doing really well right now because there's
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  Speaker 3: so much investment into AI, but also valuations in asset
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  Speaker 3: markets are then really high. So we pointed out that
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  Speaker 3: this is something that can support growth going forward. But
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  Speaker 3: if we see any sort of correction in the asset prices,
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  Speaker 3: that could also have knock go one effects, maybe cause
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  Speaker 3: all these investments to slow down a little bit to
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  Speaker 3: get more financial conditions might be affected, Growth might be affected.
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  Speaker 3: So we wanted to say that it's actually both an
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  Speaker 3: upside and downside risk. It could both cause higher growth
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  Speaker 3: and weaker but it's something that is it's so much
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  Speaker 3: in focus on the global arena that we think is
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  Speaker 3: important to point out that that's something that we're also
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  Speaker 3: looking for how it evolves over the coming months and stuff.
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  Speaker 2: As always, really appreciate your time. That'sanna Bremen, the Reserve
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  Speaker 2: Bank Government.
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