Latest / Best of Business / Kelly Eckhold: Westpac chief economist defends the bank hiking fixed rates

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Kelly Eckhold: Westpac chief economist defends the bank hiking fixed rates · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk ZEDB. Follow
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• 0:16
  Speaker 2: Brian Bridge, You've got.
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  Speaker 3: To Wellington because there's reaction to west pank yesterday. At
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  Speaker 3: Westpac Bank yesterday came out and lifted their two and
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  Speaker 3: five year interest rates by thirty basis points. And if
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  Speaker 3: you've got a mortgage, you'll be watching that closely. Nicola
• 0:30
  Speaker 3: Willison's shop around.
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  Speaker 4: Wes Pack made that choice, other banks have not. And look,
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  Speaker 4: I really want to see New Zealanders seeing that they
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  Speaker 4: have some power when it comes to where they take
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  Speaker 4: their mortgage and don't just look at the headline rates.
• 0:43
  Speaker 4: Go and hold your bank's feet to the fire. See
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  Speaker 4: if another bank will give you a better rate.
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  Speaker 3: Kelly, you're cold. Is west PAC's chief economist joining me tonight, Kelly,
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  Speaker 3: good evening.
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  Speaker 2: Good evening.
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  Speaker 3: So is this is Westpac the first and the rest
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  Speaker 3: will follow?
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  Speaker 2: Well, we're certainly the first. I assume that the rest
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  Speaker 2: will follow because in the end everybody faces the same
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  Speaker 2: increase in funding costs that's occurred in the last few weeks.
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  Speaker 3: What's driving that the swap rates? What's going on there?
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  Speaker 3: Can you explain it to us.
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  Speaker 2: Yeah, well, the Reserve Bank was unexpectedly hawkish when they
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  Speaker 2: did their monetary policy statement a few weeks ago. Now,
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  Speaker 2: we kind of expected that they would cut the rate
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  Speaker 2: by twenty five basis points, but we didn't expect them
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  Speaker 2: to call time on the easing cycle. So as a result,
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  Speaker 2: the combination of them basically saying that they saw a
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  Speaker 2: high hurdle for further cuts and then after the market
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  Speaker 2: interest rates started going up when they said that the
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  Speaker 2: market reaction was in line with what they would have expected,
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  Speaker 2: has sort of scared the markets a little bit, I suppose,
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  Speaker 2: and had them thinking about, well, if they're not cutting,
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  Speaker 2: maybe they'll be hiking at some stage. And as a result,
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  Speaker 2: they've really brought forward when they think interest rates will
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  Speaker 2: start to rise.
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  Speaker 3: The Zoot Bank governor Arna Brennen came out today and said, look,
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  Speaker 3: don't read too much into this. You know, we were
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  Speaker 3: all options are still on the table. Is the Marking
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  Speaker 3: going to listen to that?
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  Speaker 2: Well? I think sometimes the markets do overreact a little
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  Speaker 2: bit here, and I think that probably is what has
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  Speaker 2: happened here. I mean, based off what the Reserve Bank said,
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  Speaker 2: there's not really any good justification for why the two
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  Speaker 2: year and the three year and the five year interst
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  Speaker 2: rates should have gone up by well, it's almost sixty
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  Speaker 2: basis points. Now that wasn't in the Reserve Bank's forecast.
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  Speaker 2: But nevertheless, I think people in the markets got caught
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  Speaker 2: surprised by that change in tone from the Reserve Bank
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  Speaker 2: and they went positioned for it. So sometimes these markets
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  Speaker 2: can overshoot.
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  Speaker 3: Kelly, appreciate that update. Thank you, Kelly, you're called from Westpac.
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  Speaker 3: Just a note of clarification that he was speaking not
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  Speaker 3: as a spokesperson for the bank obviously, but here airs
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  Speaker 3: an economist for it.
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