Latest / Best of Business / Gareth Kiernan: Infometrics chief economist speculates ahead of tomorrow's OCR update

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Gareth Kiernan: Infometrics chief economist speculates ahead of tomorrow's OCR update · Best of Business

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  Speaker 1: You're listening to a podcast from Newstalk ZB Follow this
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  Speaker 2: The Reserve Bank is going to consider the official official
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  Speaker 2: cash rate again tomorrow. It's five and a half percent.
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  Speaker 2: It's been there for a year and a half. Gareth
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  Speaker 2: Kiernan is Informetric's chief forecaster in for Brad Olsen Tonight, Hey, Gareth, evening, Heather.
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  Speaker 2: Obviously nothing's going to change. It's the commentary we're interested in.
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  Speaker 2: What are you looking for there?
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  Speaker 3: Yeah, for us, it'll be looking at the responses that
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  Speaker 3: the Reserve Bank has to a couple of key indicators
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  Speaker 3: or things that come out over the last six weeks
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  Speaker 3: since the previous review. Firstly the budget, which was probably
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  Speaker 3: a bit less contractionary than people have been anticipating, so
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  Speaker 3: the Reserve Bank had previously expressed some concern about just
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  Speaker 3: how much more stimulitary government policy might be. And the
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  Speaker 3: second one is last week's quarterly survey Business Opinion, where
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  Speaker 3: Business conference was well down. But probably more importantly, there
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  Speaker 3: are a couple of key indicators and they're showing that
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  Speaker 3: the labor market is deteriorating further and also that inflation
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  Speaker 3: does those cost and prices and pricing pressures do seem
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  Speaker 3: to be easing. Inflation due out next week probably going
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  Speaker 3: to be closer to three percent and four percent, which
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  Speaker 3: is good news.
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  Speaker 2: If the Reserve I mean, what the Reserve Bank's been
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  Speaker 2: doing up to now, Gareth obviously, is that they've been
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  Speaker 2: jaw boning pretty hard and making it sound like there's
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  Speaker 2: even the possibility of another right rate hike in some instances.
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  Speaker 2: They surely cannot keep that tone up when the economy
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  Speaker 2: is in the state that it is at the moment,
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  Speaker 2: can they?
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  Speaker 3: Yeah, I fully agree with you there. I mean, we
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  Speaker 3: were surprised at the previous review where they had talked
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  Speaker 3: about the possibility of a rate rise. The difficulty for
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  Speaker 3: us is, even with tomorrow's review, they have tended to
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  Speaker 3: flip flop from sort of one message to another, from
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  Speaker 3: meeting to meetings, So we won't be reading too much
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  Speaker 3: into necessarily the tone. Initially, we'll sort of, you know,
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  Speaker 3: hold fire and see how the following one goes as well.
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  Speaker 3: But also he will be the inflation and the labor
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  Speaker 3: market data that come out over the next couple of
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  Speaker 3: weeks whether that does confirm some of those sort of
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  Speaker 3: weaker readings that have been coming through.
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  Speaker 2: Are you still picking November before a can.
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  Speaker 3: No, We've pushed out to February. We did that, I
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  Speaker 3: think following their most their previous meeting where they know
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  Speaker 3: we're still talking about rate rises. We think November probably
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  Speaker 3: given how the economy is evolving, would be appropriate. But
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  Speaker 3: our worries the Reserve being pretty backward looking in terms
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  Speaker 3: of how the setting policy. You know, we're pretty vocal
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  Speaker 3: in terms of on the way up, they need to
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  Speaker 3: move faster, and we're sort of feeling sort of a
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  Speaker 3: bit like history repeating itself at the moment where they
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  Speaker 3: may be a bit slow on the way down as well.
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  Speaker 2: Yeah, Hey, really good to talk to you as always, Gareth,
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  Speaker 2: really appreciate it.
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  Speaker 1: Mate.
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  Speaker 2: There's Gareth turn and chief forecast Rhythm for Metrics.
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