Latest / Best of Business / Katlyn Parker: Milford Asset Management Portfolio Manager on the market response to end-of-year OCR cut

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Katlyn Parker: Milford Asset Management Portfolio Manager on the market response to end-of-year OCR cut · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks. It'd be
• 0:12
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• 0:16
  Speaker 2: Caitlin Parker Nofedesset Management with me. Now, hy Caitlin, Hi,
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  Speaker 2: how are you? I'm very well, thank you. Now, there
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  Speaker 2: was a little bit of flirtation from the market, wasn't
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  Speaker 2: there as to the possibility of a seventy five basis
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  Speaker 2: point cut? So when we got the fifty were they
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  Speaker 2: disappointed today?
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  Speaker 3: Yeah, Look, it was very much consensus that we have
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  Speaker 3: a half percent, but they were toying with the idea
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  Speaker 3: that we might get a bit of a chunkier point
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  Speaker 3: seven five percent cut away before Christmas. But look, there
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  Speaker 3: wasn't really much disappointment. I suppose what we did see
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  Speaker 3: was a bit of volatility versus drastic and to day changes.
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  Speaker 3: And there's a bit of time between when the Reserve
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  Speaker 3: Bank released their statement and their forecast before we have
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  Speaker 3: the PRESO, so the communication was a bit mixed initially.
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  Speaker 3: And initially we actually saw a currency rally in the
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  Speaker 3: view that the official cash rate wasn't going to be
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  Speaker 3: moving as low as initially taught looking at the forecast.
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  Speaker 3: But then on the press conference with Governor Or. He
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  Speaker 3: gave very clear guidance that another half a percent cut
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  Speaker 3: is very much their base case for February. So we
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  Speaker 3: saw a lot of this unwined as well. And then
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  Speaker 3: in terms of interest rates, there was no massive move
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  Speaker 3: in terms of official cash right track. They still see
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  Speaker 3: the low at about three percent, but they did note
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  Speaker 3: that there is a higher risk of inflation volatility towards
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  Speaker 3: the end of next year. So we saw interest rates
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  Speaker 3: move up. You know, the two year was up aboutero
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  Speaker 3: point one percent at the end of the day, but
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  Speaker 3: nothing drastic to call out, and nothing major to call
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  Speaker 3: out either. On the equity side after today was very
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  Speaker 3: much as expected.
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  Speaker 2: And let's seventy five basis point that that idea that
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  Speaker 2: was basically there because the reserve banks having this mess
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  Speaker 2: of three month break, right.
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  Speaker 3: Yeah, but they're definitely they're heading on their three month
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  Speaker 3: hiatus as they do every year. So some of the
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  Speaker 3: thinking behind it was, you know, why not get ahead
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  Speaker 3: of it. A lot can happen in three months, and
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  Speaker 3: we are seeing a bit of green shoots in the
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  Speaker 3: data out there, but it's still very very soggy, and
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  Speaker 3: a lot can happen in three months. Also offshore, we
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  Speaker 3: have an inauguration in the US, but you know, regards
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  Speaker 3: if they did the point seventy five today instead of
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  Speaker 3: the half a percent, we still have an official cash
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  Speaker 3: right that starts with the four. So that's still considered
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  Speaker 3: to be very restrictive. And the Reserve Bank they're not
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  Speaker 3: expecting to get back to their the bounds of what
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  Speaker 3: they consider neutral, so not you know, stimulating growth, but
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  Speaker 3: not neither restricting growth. They're causing inflation until the end
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  Speaker 3: of twenty twenty five.
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  Speaker 2: And okay, so we've gone from five and a half
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  Speaker 2: to four point twenty five. The average mortgage rate that
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  Speaker 2: kiwis are paying is still close to six and a
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  Speaker 2: half why Yeah, so.
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  Speaker 3: That was highlighted today by Governor Or So the effective
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  Speaker 3: interest rate that's six and a half percent that kiwis
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  Speaker 3: are paying right now, that's expected to drop to about
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  Speaker 3: five point eight percent by their calculations over the next year,
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  Speaker 3: which is still pretty high. And you know why is this?
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  Speaker 3: It really comes down to the margin pressures that banks
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  Speaker 3: are having on their funding costs. So they were benefiting
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  Speaker 3: from that lower funding from the Funding for Lending program,
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  Speaker 3: you know, cheap funding that the worbins out we're able
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  Speaker 3: to provide that's now off the table, so the banks
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  Speaker 3: are having to pay up for more expensive deposits, so
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  Speaker 3: they're not rushing to cut their margins. And Governor Or
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  Speaker 3: he did note that he does expect on the flip
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  Speaker 3: side that as we see some activity in the housing
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  Speaker 3: market pickup, we should start to see some competitive pressures
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  Speaker 3: come through because today there hasn't been much going on
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  Speaker 3: in terms of lending for their housing, so there hasn't
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  Speaker 3: been anything to be too competitive about. So he is hopeful,
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  Speaker 3: I suppose an optimistic that those margins will start to
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  Speaker 3: come down a bit and relief will be felt for
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  Speaker 3: mortgage owners.
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  Speaker 2: Kaitlyn, thanks for running us through that. Appreciate It's Kaitlyn
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  Speaker 2: Pack and wilf Essect Management.
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