Latest / Early Edition with Ryan Bridge / Sharon Zollner: ANZ Chief Economist on the OCR being held at 5.5%

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Sharon Zollner: ANZ Chief Economist on the OCR being held at 5.5% · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Positive news from the Reserve Bank. Despite the OCR remaining
• 0:03
  Speaker 1: unchanged at five point five percent, it's hinted that interest
• 0:06
  Speaker 1: rate cuts could be closer than previously thought. The RB
• 0:10
  Speaker 1: and Z said they expect inflation to drop within the
• 0:12
  Speaker 1: target of one to three percent later this year. It
• 0:15
  Speaker 1: follows wide expectations that interest rates would remain unchanged until
• 0:19
  Speaker 1: next year. Sharon Zolmer is the A and Z Chief
• 0:22
  Speaker 1: economist and is with me now, Sharon, good morning. Has
• 0:24
  Speaker 1: this changed your view on when you think a rate
• 0:27
  Speaker 1: cut might happen?
• 0:29
  Speaker 2: Well, it was that bank was pretty careful to leave
• 0:31
  Speaker 2: all their options open. That comment about inflation falling back
• 0:34
  Speaker 2: in the band by the end of the year wasn't
• 0:36
  Speaker 2: actually you, but a couple of They did rehiterate they're
• 0:39
  Speaker 2: willing to change their mind, which of course they always
• 0:42
  Speaker 2: are and should be, but noted that rates will evolve
• 0:46
  Speaker 2: according to the conditions, and that they've noted that the
• 0:48
  Speaker 2: recent data has been weaker, so certainly that the market
• 0:53
  Speaker 2: jumped on it. We'd see it as tilting the risks
• 0:56
  Speaker 2: a little bit towards earlier cuts. But essentially it's going
• 0:59
  Speaker 2: to be the data that decides, and we've got the
• 1:02
  Speaker 2: inflation data next week. So with that and down the track,
• 1:07
  Speaker 2: the Reserve Bank was never going to come out with
• 1:10
  Speaker 2: a really really strong view because you know, why would
• 1:12
  Speaker 2: you when you could look a bit silly a week later.
• 1:15
  Speaker 2: So I think that's going to really be a very
• 1:18
  Speaker 2: very important piece of data.
• 1:19
  Speaker 1: And are you following the same strategy pretty much what
• 1:26
  Speaker 1: the data says?
• 1:27
  Speaker 2: Yeah, yeah, Well it's really really important because in the
• 1:30
  Speaker 2: main monetary policy statements, the Reserve Bank decided that, gosh,
• 1:34
  Speaker 2: maybe this economy is just so unfit it can't run
• 1:36
  Speaker 2: very fast at all without overheating and generating inflation. So
• 1:40
  Speaker 2: they revised down their growth forecast. At the same time
• 1:42
  Speaker 2: they revised up their inflation forecast pushed out their estimate
• 1:46
  Speaker 2: of when they'll be cutting. So it was like a
• 1:47
  Speaker 2: triple header of bad news. So hopefully we'll get some
• 1:51
  Speaker 2: better news next week that will make the Reserve Bank
• 1:54
  Speaker 2: more confident than they are winning this.
• 1:56
  Speaker 1: To hold your tongue. Hey, a hypothetical one for you.
• 1:59
  Speaker 1: If if they were to drop this talk would be
• 2:02
  Speaker 1: twenty five basis points. What would be the real impact
• 2:05
  Speaker 1: on mortgage interest rates? What would the time lag be
• 2:08
  Speaker 1: for people? Just so that they can get an idea
• 2:10
  Speaker 1: in their head.
• 2:12
  Speaker 2: Well, actually it's the Reserve Bank only controls the overnight
• 2:15
  Speaker 2: interest rate, which feeds into the floating mortgage rates. But
• 2:19
  Speaker 2: the interest rates out one year, two year, even out
• 2:21
  Speaker 2: of forrest three years, that is actually determined mostly by
• 2:24
  Speaker 2: what the market expects the Reserve Bank to do, and
• 2:28
  Speaker 2: that actually changed yesterday quite a bit. The markets will
• 2:32
  Speaker 2: make it will come and go a little bit, and
• 2:34
  Speaker 2: the data next week will be important, as I said,
• 2:36
  Speaker 2: but certainly in the hour following what the Reserve Bank
• 2:39
  Speaker 2: said yesterday, rates dropped a lot, so you could potentially
• 2:43
  Speaker 2: see mortgage rates to fall well in advance of when
• 2:46
  Speaker 2: the Reserve Bank actually moves the official cash rates, just
• 2:49
  Speaker 2: as the symmetric situation to when the Reserve Bank was
• 2:51
  Speaker 2: hiking and you saw fex rates mortgages increase well before
• 2:56
  Speaker 2: the OCR went up. On the other side, the sex
• 2:59
  Speaker 2: mortgage rates to come down before they actually start cutting.
• 3:03
  Speaker 1: All right, Sharon, thank you very much for that update.
• 3:05
  Speaker 1: Great to have you on the show. Sharon Zolner, the
• 3:07
  Speaker 1: A and Z Chief Economist. For more from News Talk
• 3:10
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• 3:13
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• 3:16
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