Latest / Best of Business / Liam Dann: NZ Herald business editor at large on the US Federal Reserve leaving rates on hold

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Liam Dann: NZ Herald business editor at large on the US Federal Reserve leaving rates on hold · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks. It'd be
• 0:12
  Speaker 1: follow this and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: The US feed has left interest rates steady this morning.
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  Speaker 2: Here's Jerome Powell, chaer and just.
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  Speaker 3: Very much in the mode of waiting to see what
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  Speaker 3: policies are enacted. And we don't know what will happen
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  Speaker 3: with tariffs, with immigration, with fiscal policy, and with regulatory policy.
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  Speaker 3: We're only just beginning to see. You actually are not
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  Speaker 3: really beginning to see much. And I think we need
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  Speaker 3: we need to let those policies be articulated before we
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  Speaker 3: can even begin to make a plausible assessment of what
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  Speaker 3: their implications for the economy will be.
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  Speaker 2: So, in other words, with Donald Trump, what you don't know,
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  Speaker 2: you don't know, and there's a lot we don't know
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  Speaker 2: at this point. Liam dan as The Herald's Business editor
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  Speaker 2: at large, and he's with me tonight. Hey, Liam Caday, Ryan,
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  Speaker 2: I mean the markets were expecting a hold, right, Yeah.
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  Speaker 4: No surprise. Really, you know, Jerome Powell knows about us
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  Speaker 4: much as we do. As far as you know what
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  Speaker 4: what Donald Trump is going to actually an act. We've
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  Speaker 4: already you know, we heard a lot on the campaign trail,
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  Speaker 4: we heard about, you know, fifty sixty percent tariffs on China.
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  Speaker 4: Since inauguration, we've heard he was going to have a
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  Speaker 4: ten percent tariff on China by February one, tariffs for
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  Speaker 4: Canada and Mexico. And look, it looks you know that
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  Speaker 4: that tariff policy does have, you know, potentially an impact
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  Speaker 4: on inflation, but you know, you just can't say it.
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  Speaker 4: He's got a he's got a review of US trade
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  Speaker 4: policy that comes back in April. That sounds, you know,
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  Speaker 4: like a sort of sensible plan, but in the meantime,
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  Speaker 4: he's kind of us using tariffs as a weird diplomatic tool,
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  Speaker 4: as we saw with Columbia at the weekend, and.
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  Speaker 2: Quite an effective one as well.
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  Speaker 4: Yeah, well it seemed to work. I mean, that's that's
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  Speaker 4: that's the thing. But you know, Colombia is not a
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  Speaker 4: not a big powerful nation in the grand scheme of things,
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  Speaker 4: and you know, how's that going to go with Europe
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  Speaker 4: or China, who would have to wait and.
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  Speaker 2: See exactly, or even India. I was reading the last
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  Speaker 2: time Trump was in and he hit them with tariffs,
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  Speaker 2: they hit America back with tariffs, and so this is
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  Speaker 2: potentially what you start as a tariff war, and we
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  Speaker 2: all lose when that situation eventuates.
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  Speaker 1: Yeah, well, I.
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  Speaker 4: Guess what we're talking about here is what happens to
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  Speaker 4: inflation and interest rates. And there's three there's three things
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  Speaker 4: that the economists and that fact Pale mentioned and there
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  Speaker 4: you know, Trump wants to pump the economy so as
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  Speaker 4: well as the tariffs, which he thinks are good for
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  Speaker 4: US business. Obviously, he's talking about tax cuts to get
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  Speaker 4: business humming, and he's talking about, you know, some sort
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  Speaker 4: of moving regulation to get business humming. And the thing
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  Speaker 4: is that that that potentially can get business humming much
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  Speaker 4: faster than the actual capacity of the economy can cope with.
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  Speaker 4: And that's where you get that sort of stimulus effect
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  Speaker 4: that we had through COVID and inflation comes back. Plus,
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  Speaker 4: the tariffs are a cost, and they're talking about, of
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  Speaker 4: course deporting all their cheap workers, so that you know,
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  Speaker 4: there's people looking at what that might do to the
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  Speaker 4: cost of labor. And so yeah, if unless Donald Trump's
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  Speaker 4: right and there's some magic economic formulas that people don't understand,
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  Speaker 4: because he has said that he knows more about this
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  Speaker 4: than the guys at the FED, then there is a
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  Speaker 4: high probability that you know, US station inflation stays higher,
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  Speaker 4: and that means their rates stay higher, and that pushes
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  Speaker 4: up that pushes up the cost of international borrowing, which
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  Speaker 4: unfortunately our banks still rely on because we don't have
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  Speaker 4: deep enough markets here. So regardless of what our reserve
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  Speaker 4: bank does, that could mean that the mortgage rates just
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  Speaker 4: don't come down as much as we'd hope.
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  Speaker 2: But does that does does it mean that the exchange
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  Speaker 2: rate will stay favorable to our exporters?
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  Speaker 4: Yeah, well, that's that's a spinoff, a good spin off,
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  Speaker 4: and a nice thing about having a floating dollar. So
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  Speaker 4: it's some bad news if you're looking to go on
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  Speaker 4: whole day and the US. And it also isn't great
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  Speaker 4: for our inflation either because it's lifting the important cost
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  Speaker 4: of imported goods like most obviously oil and petrol. But yeah,
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  Speaker 4: it is giving extra fair winds to the dairy and
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  Speaker 4: meat exporters because they you know, they're bringing the US
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  Speaker 4: dollars back into New Zealand dollars and getting more dollars
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  Speaker 4: in their pocket locally. So yeah, that's that's a sort
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  Speaker 4: of a stimulus, I guess for our economy in some respects.
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  Speaker 4: But it's kind of balanced out by the fact that
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  Speaker 4: if interest rates don't come down as much, so it's
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  Speaker 4: all sort of swings and roundabouts. And yeah, I guess
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  Speaker 4: we would probably be hoping overall that the US could
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  Speaker 4: see some interest rates come down. The Feds well, you know,
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  Speaker 4: the experts now think maybe just one or two cuts
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  Speaker 4: this year, but again they're kind of guessing. And it
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  Speaker 4: also has an effect on the Wall Street and so
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  Speaker 4: if interest rates stay high, Wall Street is not likely
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  Speaker 4: to be as as good or as strong, and that's
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  Speaker 4: also an issue for our Keywi savers of course.
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  Speaker 2: So take forecast with a pinch of salt at the moment,
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  Speaker 2: Liam the absolutely thank you so much for that, Liam
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  Speaker 2: Dan New Zealand Herald Business Editor at Large.
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