Latest / Best of Business / Kelly Eckhold: Westpac Chief Economist on whether the OCR will be cut tomorrow

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Kelly Eckhold: Westpac Chief Economist on whether the OCR will be cut tomorrow · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks'd be follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
• 0:17
  Speaker 2: Central banks around the world seem to be in a
• 0:19
  Speaker 2: bit of a crouch and hold at the moment we had.
• 0:21
  Speaker 2: The US FED haven't moved, although Trump wants them to desperately. Today,
• 0:26
  Speaker 2: the RBA holding steady. Tomorrow our decision, what will it be?
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  Speaker 2: Kelly Echold from Westpack is with me tonight. Hey Kelly, Hi,
• 0:34
  Speaker 2: how are you?
• 0:35
  Speaker 1: Yeah?
• 0:35
  Speaker 2: You're ready to do the business?
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  Speaker 3: Kelly, Well, we're not expecting any business to be done tomorrow.
• 0:41
  Speaker 3: We think we're going to leave the OCR unchanged, as
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  Speaker 3: they signaled by having no bias about what was going
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  Speaker 3: to happen to this meeting when they spoke to us
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  Speaker 3: back in Beck in May.
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  Speaker 2: What do they risk if they do come?
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  Speaker 3: What their risk is that the CPI that's due later
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  Speaker 3: on this month comes in uncomfortably high, And some of
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  Speaker 3: the data that we've seen since May suggest that it
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  Speaker 3: is actually going to be a bit stronger than what
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  Speaker 3: they forecast back in May, and quite likely actually that
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  Speaker 3: headline CPI is going to be pretty close to three
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  Speaker 3: pieces three percent, or maybe even a bit above it
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  Speaker 3: as we go through the rest of this year. So
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  Speaker 3: it's quite hard I think for an NPC that's got
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  Speaker 3: a single mandate on one to three percent inflation to
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  Speaker 3: be cutting rates when inflation is quite that high.
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  Speaker 2: Yeah, and then you've got the global backdrop, and you've
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  Speaker 2: got Trump and all that stuff, and the things that
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  Speaker 2: no one really knows about at the moment.
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  Speaker 3: Well, there's tons of uncertainty around that. I mean, generally,
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  Speaker 3: I think the tail risks about what Trump has been
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  Speaker 3: up to have reduced quite a lot since April and May,
• 1:52
  Speaker 3: and as a result, we see consensus forecasts for global
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  Speaker 3: growth actually being revised up a bit as that's been reflected.
• 1:59
  Speaker 3: Equity markets have been quite strong. But nevertheless, we don't
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  Speaker 3: quite know what's going to happen. We saw all of
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  Speaker 3: Trump's letters start to come out today. Countries have still
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  Speaker 3: got pretty high terrorists to deal with. We don't know
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  Speaker 3: what New Zealand's going to end up with, and importantly,
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  Speaker 3: we don't quite know how negotiations are going to end
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  Speaker 3: up with some of the uis' biggest trading partners in
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  Speaker 3: Europe and China and in the year as.
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  Speaker 2: Well, Kelly, we're not even at neutral yet. I mean,
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  Speaker 2: we're very we're touching neutral, but we're not completely there yet.
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  Speaker 2: Do you think we will get there this year?
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  Speaker 3: I think we could easily be at neutral now, Ryan,
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  Speaker 3: and I think even the Razerve Bank will tell you
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  Speaker 3: that they don't know for sure exactly where it is.
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  Speaker 3: Their range for neutral is between two and a half
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  Speaker 3: and three and a half percent, and in fact, most
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  Speaker 3: central banks around the world have actually got themselves into
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  Speaker 3: the neutralish stone. Now, the idea of neutral, in terms
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  Speaker 3: of guiding what's going to happen to interest rates from
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  Speaker 3: here when you're already quite close to it, isn't actually
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  Speaker 3: that helpful any more. What's going to be more helpful
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  Speaker 3: is trying to get a good guide on where inflation
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  Speaker 3: is going to go and perhaps where the economy is
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  Speaker 3: going to go as well.
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  Speaker 2: On the gold look Outlook, you know we've got ten
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  Speaker 2: percent tariffs from the US. If that's the worst that happens,
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  Speaker 2: then that's probably quite a good thing. Well not a
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  Speaker 2: good thing, of course, it could be zero, but kind
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  Speaker 2: of got off lightly when you look at what else
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  Speaker 2: is happening around the world.
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  Speaker 3: Well, a ten percent tariff in New Zealand's going to
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  Speaker 3: be the low end of the scale if that's what
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  Speaker 3: we end up with, and I'd say that's probably what
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  Speaker 3: we are going to end up with at least for
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  Speaker 3: a while. And that's the line that we've had on
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  Speaker 3: that is that's unwelcome, but manageable. I mean, we've actually
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  Speaker 3: had some pretty strong commodity prices in the last year
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  Speaker 3: or so, so the ten percent tariff has just taken
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  Speaker 3: a bit of a bit of cream off the top,
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  Speaker 3: as opposed to necessarily leaving us in a pretty tight bind.
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  Speaker 2: Appreciate your time, Kelly Echold, Westpac chief Economist on the
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  Speaker 2: decision from the Reserve Bank tomorrow.
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