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Brad Olsen: Infometrics Principal Economist on today's 'double-cut' to the OCR · Best of Business

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  Speaker 2: The OCR down fifty points now three point seventy five.
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  Speaker 2: Banks are starting to cut their rates mainly though on
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  Speaker 2: the floatings. Adrian Or who's the governor, made it pretty
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  Speaker 2: clear today what you can expect and when.
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  Speaker 3: We are looking at lowering the official cash rate a
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  Speaker 3: little bit quicker than what we projected back in November,
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  Speaker 3: but that's around fifty basis points by mid this year,
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  Speaker 3: around July, and in the document that comes broadly into
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  Speaker 3: twenty five basis point steps. It doesn't stop there. We
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  Speaker 3: have our projection of the OCR being around three percent
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  Speaker 3: by year end.
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  Speaker 2: Brad Olsen's Informtric Principal economists Brad Good Evening, Good Evening.
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  Speaker 2: So we're going cutting basically sooner and deeper.
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  Speaker 4: Why well, Effectively, the Reserve Bank is a lot more
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  Speaker 4: confident about where it's heading in certainly where it's been
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  Speaker 4: on the inflation front. I think, you know, hearing from
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  Speaker 4: the governor at his press conference this afternoon, he was
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  Speaker 4: pretty chipper about things. You know, inflation is at two
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  Speaker 4: point two percent, it's pretty close to that midpoint, and
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  Speaker 4: a lot of the expectations that the Reserve Bank had
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  Speaker 4: for how the economy was going to play out is
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  Speaker 4: broadly coming true. Those inflationary pressures have come back, the
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  Speaker 4: economy still in a tough position at the moment, and
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  Speaker 4: interest rates setting still restrictive, and so the Reserve Bank
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  Speaker 4: wants to remove those restrictions more over time. Long story short,
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  Speaker 4: this announcement was broadly or very much as expected, the
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  Speaker 4: right move to cut, the right sort of forecast now
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  Speaker 4: with effectively the Reserve Bank pricing in what the markets
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  Speaker 4: have been thinking as well, and so very much a
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  Speaker 4: sensible decision coming out from the Reserve Bank today.
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  Speaker 2: They were also saying today, don't get your hopes up
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  Speaker 2: if you're looking for cuts to your longer term rates,
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  Speaker 2: you're two to five year rates, don't be expecting much
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  Speaker 2: of a change.
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  Speaker 4: No, that's right, and even you've just noted it around.
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  Speaker 4: You know, the focus from the retail banks has been
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  Speaker 4: at the shorter end, looking at the floating rates, and
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  Speaker 4: some of those sort of shorter term numbers are the
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  Speaker 4: longer term rates have actually on a global stage, they've
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  Speaker 4: been pushing a bit higher because of what's coming out
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  Speaker 4: of the US and the US economy, and so probably
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  Speaker 4: not as much of a shift there, I think for
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  Speaker 4: households as well, though a lot of them are sure
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  Speaker 4: they might be looking for a few more cuts coming
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  Speaker 4: through in the system, But for a lot of households,
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  Speaker 4: they're just looking forward to refixing on to what is
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  Speaker 4: already a lower interest rate now than what they might
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  Speaker 4: have been on previously as the year rolls through. And
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  Speaker 4: so there's I think about half of the mortgage book
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  Speaker 4: that reprices and has to or could refix in the
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  Speaker 4: next sort of half a year or so, so a
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  Speaker 4: lot of that activity coming through. I think what the
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  Speaker 4: Reserve banker is signaling is, Look, they've had a direction
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  Speaker 4: that they were moving in. They're a bit more confident
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  Speaker 4: about doing that a bit quicker. I do worry a
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  Speaker 4: little bit that maybe they're a little bit too optimistic
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  Speaker 4: on continuing with that stronger tone. I worry maybe there's
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  Speaker 4: a bit more risk on, a bit more pressure towards
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  Speaker 4: the second half of this year. Not enough to deviate
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  Speaker 4: from where they are, but just you know, maybe a
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  Speaker 4: little bit more caution will be warranted. But that's for
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  Speaker 4: another day. The Reserve bankers said, look, they are continuing
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  Speaker 4: to cut that will come through. It might not come
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  Speaker 4: through as much for each and every household, but it's
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  Speaker 4: very much there and they've got options going forward.
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  Speaker 2: Yeah, as they keep saying today that it depends on
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  Speaker 2: the data, doesn't it, So you can always change your mind, Brad.
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  Speaker 2: Thank you for that. Brad Olsen Informetric's principle economists. You're
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