Latest / Best of Business / Mary Jo Vergara: Kiwibank senior economist on what latest CPI data says about the economy

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Mary Jo Vergara: Kiwibank senior economist on what latest CPI data says about the economy · Best of Business

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  Speaker 2: Inflation has climbed ever so slightly. It's coming at two
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  Speaker 2: point seven percent, which is actually dangerously closed to the
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  Speaker 2: top end of the target bank you know, set by
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  Speaker 2: the rbnzet of three percent, but it's coming less than
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  Speaker 2: we expected at two point eight two point nine. Mary
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  Speaker 2: Joe Vigara is a senior economist at KIWI Bank. Mary Joe, Hi,
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  Speaker 2: how are you well? Thank you? Do you think this
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  Speaker 2: is temporary?
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  Speaker 3: Yeah? I don't think there is really anything in today's
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  Speaker 3: report to suggest that this kind of bout of high
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  Speaker 3: inflation will be persistent. It's not like what we score
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  Speaker 3: during you know, twenty twenty. There's the economic undercurrent, so
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  Speaker 3: it's still very weak, and you look at domestic inflation
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  Speaker 3: that's really trending down. So I don't think this is
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  Speaker 3: going to be something that's persistent. It should be a spike,
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  Speaker 3: which means goes up and it goes back down, brilliant.
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  Speaker 2: So we're still going to get that OCR cut, are
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  Speaker 2: we next month?
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  Speaker 3: I think it does. I think it opens the door
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  Speaker 3: quite quite firmly to a cut in August. There's just
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  Speaker 3: nothing in the data it suggest that this inflation that
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  Speaker 3: will be persistent and should flow through to inflation expectations.
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  Speaker 3: All of that being contained, I think the economy needs
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  Speaker 3: that rate relief and this really does open the door
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  Speaker 3: for a rate cut next month.
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  Speaker 2: Okay, so you guys have got August locked in? What
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  Speaker 2: are the rate cuts? Are you guys picking?
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  Speaker 3: We still think we need the cash rate to be
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  Speaker 3: firmly in that stimulatory territory, so we think the cash
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  Speaker 3: rate should go down to two and a half percent.
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  Speaker 3: That's what we're forecasting. Again, we've had so much easing,
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  Speaker 3: but all those interest rates sensitive sectors, construction, all of
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  Speaker 3: them are still quite weak, which just points to the
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  Speaker 3: fact that there needs to be even more relief. So
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  Speaker 3: there's been a lot of easing done. We still expected
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  Speaker 3: to turn around, but to actually secure and guarantee your
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  Speaker 3: recovery when you're a broad based economic recovery, we need
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  Speaker 3: more stimulus from the Reserve Bank.
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  Speaker 2: And how confident are you that we are going to
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  Speaker 2: have a good economic recovery underway before election next year?
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  Speaker 3: It's just it's the way monetary policy works. You know,
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  Speaker 3: there's a bank say it's they've ease interest rates quite
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  Speaker 3: a lot two hundred and twenty five basis point that's
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  Speaker 3: been you know, we've seen interest rates retail rates for
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  Speaker 3: quite a lot. There's a wave, a big wave of
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  Speaker 3: mortgage refixing coming and we should see household disposable incomes
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  Speaker 3: increase and that should flow through to more spending. But
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  Speaker 3: we just need a little bit more to actually secure
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  Speaker 3: that recovery you've seen, you know, recoiling out of a
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  Speaker 3: really deep recession from last year, and just to prevent
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  Speaker 3: any further unnecessary, you know, damage to the lave market,
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  Speaker 3: we really need to have more stimilists come come through.
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  Speaker 3: Some of there is a bank marriage.
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  Speaker 2: I thank you Marya Jovigara Kiwibank senior economists.
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