Latest / The SME Stream / Kelly Eckhold: Westpac chief economist defends the bank hiking fixed rates

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Kelly Eckhold: Westpac chief economist defends the bank hiking fixed rates · The SME Stream

• 0:00
  Speaker 1: Brian Bridge got to Wellington because this reaction to west
• 0:04
  Speaker 1: pank yesterday. West Pac Bank yesterday came out and lifted
• 0:07
  Speaker 1: their two and five year interest rates by thirty basis points.
• 0:11
  Speaker 1: And if you've got a mortgage, you'll be watching that closely.
• 0:13
  Speaker 1: Nichola Willison's shop around.
• 0:14
  Speaker 2: Wis pack have made that choice. Other banks have not.
• 0:19
  Speaker 2: And look, I really want to see New Zealanders seeing
• 0:21
  Speaker 2: that they have some power when it comes to where
• 0:23
  Speaker 2: they take their mortgage. And don't just look at the
• 0:25
  Speaker 2: headline rates. Go and hold your bank's feet to the fire.
• 0:28
  Speaker 2: See if another bank will give you a better rate.
• 0:30
  Speaker 1: Kelly, you're cold? Is west PAC's chief economist joining me tonight, Kelly,
• 0:33
  Speaker 1: good evening.
• 0:34
  Speaker 3: Good evening.
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  Speaker 1: So is this is Westpac the first and the rest
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  Speaker 1: will follow?
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  Speaker 3: Well, we're certainly the first. I assume that the rest
• 0:43
  Speaker 3: will follow because in the end everybody faces the same
• 0:46
  Speaker 3: increase in funding costs that's occurred in the last few weeks.
• 0:50
  Speaker 1: What's driving that the swap rates? What's going on there?
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  Speaker 1: Can you explain it to us? Yeah?
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  Speaker 3: Well, the Reserve Bank was unexpectedly hawkish when they did
• 1:01
  Speaker 3: their monetary policy statement a few weeks ago. Now, we
• 1:05
  Speaker 3: kind of expected that they would cut the rate by
• 1:08
  Speaker 3: twenty five basis points, but we didn't expect them to
• 1:11
  Speaker 3: call time on the easing cycle. So as a result,
• 1:14
  Speaker 3: the combination of them basically saying that they saw a
• 1:17
  Speaker 3: high hurdle for further cuts and then after the market
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  Speaker 3: interest rates started going up when they said that the
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  Speaker 3: market reaction was in line with what they would have expected,
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  Speaker 3: has sort of scared the markets a little bit, I suppose,
• 1:31
  Speaker 3: and had them thinking about, well, if they're not cutting,
• 1:34
  Speaker 3: maybe they'll be hiking at some stage, And as a result,
• 1:36
  Speaker 3: they're really brought forward when they think interest rates will
• 1:39
  Speaker 3: start to rise.
• 1:40
  Speaker 1: Zoom. Bank Governor Arna Brennen came out today and said, look,
• 1:44
  Speaker 1: don't read too much into this. You know, we were
• 1:46
  Speaker 1: all options are still on the table. Is the marking
• 1:49
  Speaker 1: going to listen to that?
• 1:51
  Speaker 2: Well?
• 1:52
  Speaker 3: I think sometimes the markets do overreact a little bit here,
• 1:56
  Speaker 3: and I think that probably is what has happened here.
• 1:58
  Speaker 3: I mean, based on what the Reserve Bank said, there's
• 2:01
  Speaker 3: not really any good justification for why the two year
• 2:05
  Speaker 3: and the three year and the five year interst rates
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  Speaker 3: should have gone up by well, it's almost sixty basis points.
• 2:10
  Speaker 3: Now that wasn't in the Reserve Bank's forecast. But nevertheless,
• 2:14
  Speaker 3: I think people in the markets got caught surprised by
• 2:18
  Speaker 3: that change in tone from the Reserve Bank and they
• 2:21
  Speaker 3: went positioned for it. So sometimes these markets can overshoot.
• 2:26
  Speaker 1: Kelly, appreciate that update. Thank you, Kelly, you called from Westpac.
• 2:29
  Speaker 1: Just a note of clarification that he was speaking not
• 2:31
  Speaker 1: as a spokesperson for the bank obviously, but here airs
• 2:34
  Speaker 1: an economist for it. For more from hither Duplessy Allen Drive,
• 2:38
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• 2:42
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