Latest / Best of Business / Anna Breman: Reserve Bank Governor on whether the Middle East conflict could drive up the OCR

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Anna Breman: Reserve Bank Governor on whether the Middle East conflict could drive up the OCR · Best of Business

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  Speaker 1: iheartradiogither dup.
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  Speaker 2: C Ellen Reserve Bank has kept the OCR at two
• 0:20
  Speaker 2: point twenty five percent. Inflation will climb, though we're being
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  Speaker 2: warned it's now predicted to peak at four point two
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  Speaker 2: percent in this quarter. The Reserve Bank governor is Anna
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  Speaker 2: brem And Hyena. Hello, how long are you prepared to
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  Speaker 2: look through inflation at that level?
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  Speaker 3: As long as we see that it's falling back and
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  Speaker 3: that the medium term inflation goes back towards two percent,
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  Speaker 3: It's impossible to say exactly how long that will be.
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  Speaker 3: But today we've got some positive news that meant that
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  Speaker 3: oil prices were falling. We'll see if that holds up.
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  Speaker 3: If that holds up, that's good news. If we see
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  Speaker 3: old prices going back up, that's bad news.
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  Speaker 2: Are you have you have you factored in the fact
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  Speaker 2: that diesel has now hit four dollars a leasa, which
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  Speaker 2: seems extraordinarily high.
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  Speaker 3: It is extraordinary high, and I do understand how much
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  Speaker 3: this hurts, you know, just regular households, the farm to NEI,
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  Speaker 3: their diesel. Diesel prices actually gone up ninety eight When
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  Speaker 3: I looked yesterday, it was ninety eight percent up since
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  Speaker 3: before the war started. So when we did our forecast,
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  Speaker 3: that Q two number at four point two percent, inflation
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  Speaker 3: is highly uncertain, of course, but we took into account
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  Speaker 3: higher fuel prices and the future prices in the market
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  Speaker 3: as well, and that is what the market expects future
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  Speaker 3: oil prices to be, and then we ended up with
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  Speaker 3: that number of four point two. But it is it
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  Speaker 3: is bad to see near term inflation increasing this much.
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  Speaker 2: Okay, so what do you Let's just assume the best
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  Speaker 2: case scenario that the ceasefire that starts today holds indefinitely.
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  Speaker 2: What happens from here for us, well.
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  Speaker 3: If that happens, it will depend on how quickly supply
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  Speaker 3: change gets better. So you know, if we see that
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  Speaker 3: oil prices, if it always starts flowing again gas fertilized,
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  Speaker 3: et cetera, comes through the strait of hormus, that should
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  Speaker 3: mean that prices fall back, and that should mean that
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  Speaker 3: you islanders will see lower fuel costs in coming weeks
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  Speaker 3: and months, and that means that inflation should be falling back.
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  Speaker 3: It means that firms don't face so much higher costs,
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  Speaker 3: so they don't have to pass that on to consumers,
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  Speaker 3: and that would mean that we see more of an
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  Speaker 3: economic recovery again. But again we have to be prepared
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  Speaker 3: for a worst case scenario as well. Unfortunately, but it
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  Speaker 3: was good news with the ceasefire today.
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  Speaker 2: What's your worst case scenario?
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  Speaker 3: Well, the worst case scenario is that the ceasefire doesn't
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  Speaker 3: hold and that oil prices go back up back to
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  Speaker 3: the levels they were or even higher, and that firms
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  Speaker 3: are already squeezed, you know, with higher costs after several years,
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  Speaker 3: that they might feel that they have to pass on
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  Speaker 3: these costs to consumers, and that we see inflation getting
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  Speaker 3: embedded in the economy. That would be really bad. If
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  Speaker 3: we see that medium term inflation pressures are higher, that's
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  Speaker 3: when we say that we would act decisively and hike
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  Speaker 3: interest rates.
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  Speaker 2: Okay, let's assume the worst the best case scenario, and
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  Speaker 2: this is a ceasefire that now holds. Is the recovery
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  Speaker 2: for this country still now a twenty twenty seven story,
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  Speaker 2: or do you think we can squeeze some in this year?
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  Speaker 3: I think that if we see that the ceasefire actually
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  Speaker 3: holds and all prices fall back down. If your prices
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  Speaker 3: come back down, I do think that we will see
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  Speaker 3: that firms are resilient and that that we'll start investing again,
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  Speaker 3: and that we'll see stronger economic growth this year, stronger
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  Speaker 3: labor market for households as well. So if we see
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  Speaker 3: the ceasefire holding, I think we can definitely see better
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  Speaker 3: growth number this year.
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  Speaker 2: Okay, ouda of interest, I own I've just come off
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  Speaker 2: my mortgage has only just come off now, and I'm
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  Speaker 2: going to refix in the next few days. What proportion
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  Speaker 2: of people do you think are still on those higher
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  Speaker 2: rates therefore obviously not spending as much in the economy
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  Speaker 2: as we'd like them to be.
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  Speaker 3: So I don't have those numbers just in front of
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  Speaker 3: me now. We do keep on looking at that at
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  Speaker 3: a rega the basis because it is important to us.
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  Speaker 3: We know that some households will come off the high rates,
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  Speaker 3: and you know, given the rate cuts that Reserve bank
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  Speaker 3: are downe they will be able to refix at mortgage
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  Speaker 3: mortgage rates. But on average, you know, the average mortgage
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  Speaker 3: rates will not come back down much more now, but
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  Speaker 3: for some households it will still be you know, looking
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  Speaker 3: up a little bit and they can refix at lower
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  Speaker 3: interest rates than what they had if they've just come
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  Speaker 3: off some fixed rates and listen.
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  Speaker 2: Good to talk to you is always thank you very
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  Speaker 2: much for your time. I realize you busy and a
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  Speaker 2: brim in the Reserve Bank Governor.
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