Latest / Best of Business / Liam Dann: NZ Herald business editor at large on ASB predicting OCR will cut rates next week

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Liam Dann: NZ Herald business editor at large on ASB predicting OCR will cut rates next week · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk ZB. Follow
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• 0:17
  Speaker 2: As I was telling you earlier, there's been a surprise
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  Speaker 2: call from the ASB economists late this afternoon. They now
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  Speaker 2: also think that the Reserve Bank will drop the official
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  Speaker 2: cash rate next week. Liam Dan is The Herald's Business
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  Speaker 2: editor at large. ALM Yet, I mean, would you consider
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  Speaker 2: this now mounting pressure on the Reserve Bank, given that
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  Speaker 2: you've got ASB B and z an Kiwibank saying go
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  Speaker 2: next week?
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  Speaker 3: Yeah, well, I mean it certainly is pressure of a kind.
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  Speaker 3: It's kind of exciting. It's probably the most interesting ocr
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  Speaker 3: call we've had for well, it is for more than
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  Speaker 3: a year. Good on them ASBs. So in caution to the
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  Speaker 3: wind carp ADM. I think they said, you know that
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  Speaker 3: we can go now, which is effectively saying really that
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  Speaker 3: they think we've got inflation beat, which is something to
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  Speaker 3: cheer about as well. It's a bit of a marginal
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  Speaker 3: call for a couple of reasons. You know, we haven't
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  Speaker 3: got inflation under three year three percent, which is you know,
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  Speaker 3: into the target range, so you have to be very
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  Speaker 3: confident that the economy is now so on its knees
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  Speaker 3: and flat and all that sort of stuff, that there's
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  Speaker 3: nothing else that can happen that except for the inflation
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  Speaker 3: to keep falling. So there is that, you know. I've
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  Speaker 3: argued that maybe the all the market turmoil and then
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  Speaker 3: what's happening in the US is in Japan as a
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  Speaker 3: sort of a hook that the Reserve Bank can hang
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  Speaker 3: its hat on. But Kvy Bank also made the point,
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  Speaker 3: Jared Kerr making the point that you know, technically the
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  Speaker 3: Reserve Bank still has next August as in its forecast
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  Speaker 3: for the first rate cap, so there is a pretty
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  Speaker 3: big credibility gap to leap there, you know, if you're
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  Speaker 3: going to be talking about cutting next week this August.
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  Speaker 3: And I know they didn't change the forecast because they
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  Speaker 3: just don't do that at the last monetary policy review,
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  Speaker 3: and it does date back to May when things are
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  Speaker 3: a bit different. But still, you know, Kiev Bank actually
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  Speaker 3: saying that they think they should cup now, but they
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  Speaker 3: probably won't because it's just too much of a leap
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  Speaker 3: and it would look bad. Now. I don't know, if
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  Speaker 3: you're going to save the economy, you've got.
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  Speaker 2: To yes, anyone else is going to look really bad.
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  Speaker 2: Is if they if they hold onto this until November
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  Speaker 2: so that they can actually stand in front of the
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  Speaker 2: cameras as opposed to just issue a press release in
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  Speaker 2: October or August. If they hold onto it until November
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  Speaker 2: and they drive us deeper into the maya that we're in,
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  Speaker 2: I mean that looks worse, doesn't it than changing your mind?
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  Speaker 3: Yeah? Well, there's never never There are always terrible choices.
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  Speaker 3: But yeah, I mean they could, they could go in October,
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  Speaker 3: but they'll be standing in front of the cameras next week.
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  Speaker 2: Will they look they've got to go next week? Then
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  Speaker 2: don't they? Because I mean this is what AB is saying.
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  Speaker 2: The risk of type monetary policy overshooting has got real.
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  Speaker 2: I think we can all see that.
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  Speaker 3: Yeah, I mean it was somewhat inevitable. I mean, central
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  Speaker 3: banks in monetary policy generally has it works and so
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  Speaker 3: we like it because it works, but we know that
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  Speaker 3: it's very blunt and it tends to be too much
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  Speaker 3: one way. We feel too much stimulus and you see
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  Speaker 3: too much and then you know, we argue about whether
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  Speaker 3: whether it could have been done better, and well, maybe
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  Speaker 3: it could have, but there's a there's a there's a
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  Speaker 3: you know, there's an opportunity here. It does look like
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  Speaker 3: inflation isn't going anywhere but down from here it would
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  Speaker 3: be a surprise. So if it did bounce back up,
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  Speaker 3: but you've got to remember that it would be absolutely
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  Speaker 3: disastrous to cut and then have inflation bounce back up.
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  Speaker 3: You know, that would just blow on our minds and
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  Speaker 3: be too much where we want to cope of the cycle.
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  Speaker 3: So they do, they do have to be sure. But
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  Speaker 3: you know, it's funny. It's such a there's so much
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  Speaker 3: going on. It's almost like a long long time till Wednesday.
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  Speaker 3: You know, if if we see a couple more nights
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  Speaker 3: at market turmoil and so forth, that probably would be enough.
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  Speaker 3: You know, a lot of the other economists were saying, well,
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  Speaker 3: that unemployment number yesterday wasn't bad enough to justify it yet,
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  Speaker 3: you know, which is a weird way of looking at it.
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  Speaker 3: But it wasn't wasn't worse than expected. It was about
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  Speaker 3: being unexpected, So that that might give them some reason
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  Speaker 3: to hold on till October. You could end up having
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  Speaker 3: to do double cuts at that point.
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  Speaker 2: Look, ultimately, they're going to get judged liam on what
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  Speaker 2: we are like when they are finished with this and
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  Speaker 2: that's not going to be good for the my thing
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  Speaker 2: either way. Liam, it's really really good to talk to you.
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  Speaker 2: Thank you about this, Liam Dan, the Herald's Business editor
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  Speaker 2: at large.
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