Latest / The SME Stream / Brad Olsen: Infometrics Principal Economist on the possibility of the OCR going up later this year

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Brad Olsen: Infometrics Principal Economist on the possibility of the OCR going up later this year · The SME Stream

• 0:00
  Speaker 1: So there is a warning that interest rates could start
• 0:02
  Speaker 1: rising as early as May. The warnings come from Inframetrics
• 0:04
  Speaker 1: Sprad Olson, and he's with us. Happy New Year, Brad,
• 0:07
  Speaker 1: same to you here that Okay, now let me see
• 0:09
  Speaker 1: if I've got this right. You still think most likely
• 0:11
  Speaker 1: it starts rising in November, but there's an outside chance
• 0:14
  Speaker 1: it starts rising as early as May.
• 0:16
  Speaker 2: Yep, that's broadly correct. At the moment, we think the
• 0:19
  Speaker 2: conditions will come through this year. That means that yes,
• 0:22
  Speaker 2: interest rates will have to rise, but not sort of
• 0:25
  Speaker 2: as quickly. But we've sort of highlighted this potential around May,
• 0:28
  Speaker 2: just because after that inflation figure that came out on Friday,
• 0:31
  Speaker 2: we've had a lot of questions from people saying, well,
• 0:33
  Speaker 2: you know, how quickly might things have to adjust? And look,
• 0:36
  Speaker 2: I've had a few people in the business community go, well,
• 0:39
  Speaker 2: does this mean that the February monetary policy statement from
• 0:42
  Speaker 2: the Reserve Bank do they have to you know, whipsaw
• 0:44
  Speaker 2: around that quickly. And that's why we've just wanted to
• 0:46
  Speaker 2: highlight that, No, it won't have to happen that quick
• 0:49
  Speaker 2: You'd need even stronger continue data to come through before
• 0:53
  Speaker 2: the Reserve Bank would make such an abrupt change, and
• 0:57
  Speaker 2: the earliest you'd probably have enough data to sort of
• 0:59
  Speaker 2: convince your South as the bank that they need to
• 1:01
  Speaker 2: move quicker would be made. So that's sort of the
• 1:04
  Speaker 2: start of the bookcase, if you will, and then going
• 1:06
  Speaker 2: all way through the end of this year in terms
• 1:08
  Speaker 2: of potential. But at the moment it does look like
• 1:11
  Speaker 2: it's more that latter half. Regardless though, expectations are clearly
• 1:15
  Speaker 2: starting to become earlier than everyone expected in terms of
• 1:19
  Speaker 2: those interest rate hikes, and that's only on the official
• 1:21
  Speaker 2: cash rate. Actual bank rates for longer term mortgages have
• 1:25
  Speaker 2: already started an increase of touch already this year.
• 1:28
  Speaker 1: How much of your prediction factors in the fact that
• 1:32
  Speaker 1: Anna Brennan is reasonably hawkish.
• 1:35
  Speaker 2: Well, in a sense, we've sort of taken a fairly
• 1:37
  Speaker 2: neutral view there because we haven't heard her speak very
• 1:40
  Speaker 2: directly on New Zealand data and what that means of
• 1:43
  Speaker 2: her observations of the economy and inflation. But we'll hear
• 1:48
  Speaker 2: a lot more of that sort of come February and
• 1:50
  Speaker 2: we will adjust our views then. But I think probably
• 1:52
  Speaker 2: most importantly, when either of you seen inflation outside the
• 1:56
  Speaker 2: target band and the Reserve Bank not starting to have
• 1:59
  Speaker 2: to get going a bit, and probably realistically this view
• 2:03
  Speaker 2: reinforces what we were saying in at least October, if
• 2:05
  Speaker 2: not earlier, that further interest rate cuts below three percent
• 2:09
  Speaker 2: really did start to create an uncomfortable spot where we're
• 2:12
  Speaker 2: probably going to, as we've done the last couple of years,
• 2:15
  Speaker 2: keep overdoing this sort of either stimulus or the contraction
• 2:19
  Speaker 2: that comes from in the economy to try and get
• 2:21
  Speaker 2: us on an even keel. And I dare suspect that
• 2:23
  Speaker 2: if we look back at last year's changes, we probably
• 2:26
  Speaker 2: should have stopped at three because all of those interest
• 2:29
  Speaker 2: rate cuts after that they haven't hit the economy yet.
• 2:32
  Speaker 2: And if we're already at three point one percent, it
• 2:34
  Speaker 2: does make me uncomfortable that that inflationary pressure is already
• 2:37
  Speaker 2: more intense than anyone would like it.
• 2:39
  Speaker 1: Brad, it's good to talk to you, I suppose, despite
• 2:41
  Speaker 1: the topic. Thank you very much, Brad Olsen Informetric's Principle Economists.
• 2:45
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• 2:48
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• 2:51
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