Latest / Best of Business / Jenee Tibshraeny: NZ Herald Wellington business editor on the Reserve Bank cutting the OCR for the first time since 2020

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Jenee Tibshraeny: NZ Herald Wellington business editor on the Reserve Bank cutting the OCR for the first time since 2020 · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks'd be follow
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  Speaker 2: A Reserve Bank Governor Adrian Or had to do a
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  Speaker 2: fair bit of gymnastics today to explain the cut to
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  Speaker 2: the official cash rate and if the goal of monetary
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  Speaker 2: policy in this situation is for a soft landing, can
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  Speaker 2: you say you've actually delivered that? And I don't know
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  Speaker 2: how to answer your other question really so yeah. Jenetive
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  Speaker 2: Trainey is The Herald's Wellington Business editor. She was in
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  Speaker 2: the room this afternoon. Adrian A hey, Heather couldn't say
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  Speaker 2: he got it wrong the way.
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  Speaker 3: No, he didn't want to say he got it wrong.
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  Speaker 3: So the question that I asked the governor was back
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  Speaker 3: in May when the Reserve Bank suggested the OCI would
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  Speaker 3: only be cut later next year. Was the Reserve Bank
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  Speaker 3: wrong in May? Or? Was it bluffing? Was it draw boning?
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  Speaker 3: Was it trying to talk the market and to keeping
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  Speaker 3: interest rates elevated? And Adrian all said. What he did
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  Speaker 3: say was that no, they weren't bluffing. They weren't you
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  Speaker 3: just trying to talk the market into doing what it wanted,
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  Speaker 3: but rather that the economic data that has come out
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  Speaker 3: since May has suggested there's the economy is quite a
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  Speaker 3: bit weaker than expected, and hence the reason the IRBZ
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  Speaker 3: cut today and has projected further cuts twenty five basis points,
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  Speaker 3: you know, at each next meeting.
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  Speaker 2: His argument basically came down to things have changed so
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  Speaker 2: much between May and August that suddenly a cut was
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  Speaker 2: on was on the cards and actually happening. Do you
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  Speaker 2: buy that?
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  Speaker 3: Look, I think the consensus among economists was that the
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  Speaker 3: Reserve Bank was wrong in May. So back then the
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  Speaker 3: economy was not performing strongly. You know, anyone who walks
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  Speaker 3: around town or you know, is trying to manage their
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  Speaker 3: budget or whatever, realizes that that things are not great.
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  Speaker 3: But the Reserve Bank was an outlier at that point.
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  Speaker 3: It didn't seem to recognize the weakness in the economy
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  Speaker 3: to the extent that he run out. I mean, markets
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  Speaker 3: back then we're pricing in cuts as well, so you know,
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  Speaker 3: they were shocked that the Reserve Bank thought the ocr
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  Speaker 3: might need to be hiked again. So I think the
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  Speaker 3: consensus ABI and Z was wrong back in May.
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  Speaker 2: Yeah, yeah, yeah, totally. Hey. I was actually quite impressed
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  Speaker 2: with how he handled it because he is known to,
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  Speaker 2: like me, wears his emotions quite close to the skin.
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  Speaker 3: Yeah, look, I mean this is the thing. So I
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  Speaker 3: think there's two schools of thought have come out of
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  Speaker 3: this flip flop situation. You have people like Brad Olsen,
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  Speaker 3: the Infametrix economists who think the Reserve Bank's credibility has
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  Speaker 3: been eroded because it's changed its positions so drastically in
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  Speaker 3: such a short space of time. So how do we
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  Speaker 3: know when it has these projections? Are they really projections
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  Speaker 3: or is it just kind of like basically trying to
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  Speaker 3: talk the market this way that way. Then you have
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  Speaker 3: other economists like bean Z's Steven Topless, and he says, well, yep,
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  Speaker 3: probably got it wrong in May, but actually really good
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  Speaker 3: that they're correcting their position now because in Stephen Tops' view,
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  Speaker 3: at least a cut was definitely the right call to
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  Speaker 3: make today and actually should have been made earlier. So
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  Speaker 3: I think it is an interesting tension as to how
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  Speaker 3: how critical you want what you want to be of
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  Speaker 3: the Irby and Z. The other thing I would point
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  Speaker 3: out is that they've started putting emphasis on different data. Previously,
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  Speaker 3: it sounded like the Reserve Bank put emphasis on the CPI.
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  Speaker 3: You know, the inflation data, the GDP data, the Tier
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  Speaker 3: one data. Now it sounds like they're putting a bit
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  Speaker 3: more emphasis on on the business confidence surveys, the Tier
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  Speaker 3: two data, some of the more real time information about
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  Speaker 3: how the economy is going. That's the sort of that's
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  Speaker 3: the sort of information that that markets track really closely.
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  Speaker 3: That is perhaps, yeah, perhaps a wee change of approach there.
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  Speaker 2: That was very interesting. I noticed that as well. Jennay,
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  Speaker 2: Thank you so much, Chaintive Training the Heralds Wellington Business Editor.
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