Kelly Eckhold: Westpac Chief Economist on the OCR figures set to be released today

The Reserve Bank is expected to make a “short and sweet” announcement today. 

Economists are expecting the OCR to remain untouched at 5.5%, as it has the last six times. 

Westpac Chief Economist Kelly Eckhold told Ryan Bridge that the Reserve Bank said in May that interest rates would have to remain restrictive for a protracted period to get inflation down, so not much has changed for them.

While some banks are predicting a cut this year, Westpac is holding firm on their prediction of early next year. 

Eckhold said that they don’t think that will change today, and while they’re all hoping there will be some interest rate relief soon, the reality is that inflation won't go away by itself.  

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
We're going out to Kelly Echold, who is with us
from Westpac, the chief economist there. Kelly, good morning. It
is OCR day today. We're expecting it to be held
at five and a half percent. But what are we
looking for in terms of language from the Reserve Bank today?

Speaker 2 (00:14):
Well, today we think the Reserve Bank's going to keep
it pretty tight here. They advocated back in May that
they thought interestrates you have to remain restrictive for a
protracted period to get inflation down. So not very much
has changed them, I suspect, So I think it's going
to be pretty short and sweet. Perhaps some hint that

(00:34):
the economy has turned down a little bit based off
some of the indicators have seen since May.

Speaker 1 (00:41):
And banks like ASB are predicting that there'll be a
cut in November. West Pac saying, now you still think
early next year? Is that still your view? Could that
change today?

Speaker 2 (00:51):
I don't think it all changed today and it is
still view. The challenge thing for the Reserve Bank is
that they really need to see some runs on board
here with respect to getting that inflation rate down within
their target range. Clation's running at four percent, it's twice
the target and whilst we're all hoping that there'll be
some interest rate relief sometime soon. The reality is that

(01:15):
inflation way girl by itself. It's it's going to require
that period of tight conditions, flat economic activity so that
we can actually get to where things have been forecasted.

Speaker 1 (01:27):
What about this issue of non tradable inflation that keeps
wearing its head that actually the reserve banks blunt tool
isn't working for for things like you know, council rate increases,
et cetera.

Speaker 2 (01:40):
Yeah, well, it takes a bit of time I think
for some of these things to happen. I mean the
particular issues. I guess that the council rates and also
the insurance charges as well. You know, the typical lags
on those things are a little bit longer, and that's
why we've been sitting here with these interest rates for
a relatively long period of time compared to previous cycles.

(02:01):
But the fact that the economy has responded to interest
rates gives you confidence that is going to have an impact.
But it's just going to take time. And it's that
message of the time required to have to keep interest
rates at this level is the key message that the
Reserve Bank has really been telling.

Speaker 1 (02:19):
Us all right, so we've looked for the language today,
but it will be around the edge. Is Kelly e
called the Westpac chief economists with us this morning. That
decision by the way drought at two pm. For more
from News Talks B listen live on air or online,
and keep our shows with you wherever you go with
our podcast on iHeartRadio.