Latest / Best of Business / Gareth Kiernan: Infometrics Chief Forecaster hopeful the Reserve Bank will cut rates in February

Transcript

Gareth Kiernan: Infometrics Chief Forecaster hopeful the Reserve Bank will cut rates in February · Best of Business

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  Speaker 1: You're listening to a podcast from news Talk zed B.
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  Speaker 2: And keeping of course with inflation. It is the big
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  Speaker 2: story of the day and how's it going to affect
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  Speaker 2: the Reserve Bank who are making a decision about our
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  Speaker 2: interest rates in February. So we've got all the four
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  Speaker 2: big banks cutting their mortgage interest rates over the last
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  Speaker 2: few days. So there's a signal there. There is a
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  Speaker 2: question as to just how low the official cash rate
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  Speaker 2: will come in light of these stats and in light
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  Speaker 2: of the fears that inflation might re emerge a bit
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  Speaker 2: over the course of the year. So Gareth Kenan is
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  Speaker 2: Infametrics Principal forecaster and joins me. Now, hello Gareth Andrew.
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  Speaker 2: So everyone's expecting a fifty point drop in the OCR.
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  Speaker 2: Where do you see the OCR going now that the
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  Speaker 2: inflation figures have actually come in.
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  Speaker 3: Yeah, we're still sitting with a fifty point drop in
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  Speaker 3: next month's meeting at this stage. I mean, look, the
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  Speaker 3: markets over the last month or so have been looking
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  Speaker 3: internationally at some of the trends that have been going on,
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  Speaker 3: looking at the New Zealand dollar, which is down six
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  Speaker 3: percent over the last three months and going, oh, okay,
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  Speaker 3: there's just some inflationary risks out there that perhaps we're
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  Speaker 3: not seeing when the Reserve Bank last published their forecasts,
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  Speaker 3: but taking today's darted look, their non tradable inflation is
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  Speaker 3: still coming down. There's risks on the trade will side,
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  Speaker 3: but I don't think there's enough there to sway the
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  Speaker 3: Reserve Bank towards going with a smaller twenty five point cut.
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  Speaker 2: Okay, And I think the rest of the banks must
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  Speaker 2: agree because they've preemptively started dropping their interest rates. What
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  Speaker 2: do you think has sparked the drop in mortgage interest
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  Speaker 2: rates in our banks.
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  Speaker 3: Yeah, we've seen some of the shorter term wholesale rates
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  Speaker 3: drifting down, basically following the GDP numbers late last year,
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  Speaker 3: which recourse showed we're in quite a significant recession at
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  Speaker 3: that point in time. We've seen over the last possibly
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  Speaker 3: eight to ten days, some of those wholesale rates have
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  Speaker 3: actually been drifting a little bit back up again. So
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  Speaker 3: it almost looks to me like the banks have been
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  Speaker 3: away on holiday. They've come back and seen their funding
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  Speaker 3: costs have come down and mostly held down, and they've
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  Speaker 3: reacted to that. Financial markets have priced in a fifty
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  Speaker 3: point cut next month, So there is an element of
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  Speaker 3: passing that on to borrowers as well.
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  Speaker 2: And you've done some research and you found that people
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  Speaker 2: who consistently fix for one year get the best deals.
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  Speaker 2: Is that correct.
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  Speaker 3: Over the longer term year? Certainly when you look through
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  Speaker 3: following the global financial crisis right through until COVID struck us,
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  Speaker 3: the one year rate was pretty consistently the cheapest one
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  Speaker 3: out there if that was what you were consistently doing,
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  Speaker 3: and you know, fixing for longer terms in general was
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  Speaker 3: not going to be as good a bet. Of course,
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  Speaker 3: we know that if you fix for five years back
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  Speaker 3: in twenty twenty one, when the rates were three percent,
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  Speaker 3: you'd be arguing with me. And you know that was
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  Speaker 3: one of these sort of anomalies or unusual situations. But
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  Speaker 3: when we're looking forward again from here, we are expecting,
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  Speaker 3: in general, the one year rate to be the most attractive,
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  Speaker 3: almost financially beneficial.
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  Speaker 2: Guys Kennan fromentals, Can I ask you a question, can
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  Speaker 2: you fit a waper blade?
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  Speaker 3: I can for the wiper blade, actually did it for
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  Speaker 3: the first time a couple of months ago. I'm forty eight.
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  Speaker 3: Finally to finally manage to have the opportunity to do it.
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  Speaker 2: Good And can you hang a picture frame?
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  Speaker 3: I can do that to you, good man.
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  Speaker 2: Apparently gen Z can't. So we're talking about in a
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  Speaker 2: few moments time. And I thank you so much for
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  Speaker 2: your time today, Gareth.
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