Liam Dann: NZ Herald business editor at large on ASB predicting OCR will cut rates next week

ASB has made a surprise call ahead of next week's OCR announcement.

The bank is predicting the Reserve Bank will cut rates in the coming days - a sooner timeframe than initially predicted.

NZ Herald business editor at large Liam Dann explains whether or not ASB makes a good case.

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Episode Transcript

Speaker 1 (00:00):
As I was telling you earlier, there's been a surprise
call from the ASB economists late this afternoon. They now
also think that the Reserve Bank will drop the official
cash rate next week. Liam dan Is The Herald's Business
editor at large, ALM got I mean, would you consider
this now mounting pressure on the Reserve Bank, given that
you've got ASB B and z at ankiw we Bank
saying go next week?

Speaker 2 (00:20):
Yeah, well, I mean it certainly is pressure of a kind.
It's kind of exciting. It's probably the most interesting ocr
call we've had for well, it is for more than
a year. Good on them, ASBs sow in caution the
wind carp ADM. I think they said, you know that
that we can go now, which is effectively saying really
that they think we've got inflation beat, which is something

(00:43):
to cheer about as well. It's a bit of a
marginal call for a couple of reasons. You know, we
haven't got inflation under three yet, three percent, which is
into the target range. So you have to be very
confident that the economy is now on its knees and
flat and all that sort of stuff, that there's nothing

(01:04):
else that can happen that except for the inflation to
keep falling. So there's that. You know. I've argued that
maybe the all the market turmoil and then what's happening
in the US is in Japan as a sort of
a hook that the Reserve Bank can hang its hat on.
But kvy Bank also made the point, Jared Kerr making

(01:24):
the point that you know, technically the Reserve Bank still
has next August as in its forecast for the first
rate cup, so there is a pretty big credibility gap
to leap there, you know, if you're going to be
talking about cutting next week this August, and I know
they didn't change the forecast because they just don't do

(01:44):
that at the last monetary policy review, and it does
date back to May when things are a bit different.
But still, you know, Keevy Bank actually saying that they
think they should cut now, but they probably won't because
it's just too much of a leap and it would
look bad. Now. I don't know, if you're going to
save the economy, you've got.

Speaker 1 (02:03):
To yes, everyone else is going to look really bad.
Is if they if they hold onto this until November
so that they can actually stand in front of the
cameras as opposed to just issue a press release in
October or August. If they hold onto it until November
and they drive us deeper into the maya that we're in.
I mean that looks worse, doesn't it than changing your mind?

Speaker 2 (02:24):
Yeah, well there's never never There are always terrible choices.
But yeah, I mean they could, they could go in October,
but they'll be standing in front of the cameras next week.

Speaker 1 (02:34):
Will they look They've got to go next week? Then,
don't they? Because I mean this is what AB is saying.
The risk of type monetary policy overshooting has got real.
I think we can all see that.

Speaker 2 (02:44):
Yeah, I mean it was somewhat inevitable. I mean, central
banks in monetary policy generally has it works and so
we like it because it works, but we know that
it's very blunt and it tends to be too much
one way. We feel too much stimulus and you see
too much and then you know, we argue about whether
whether it could have been done better, and well, maybe

(03:05):
it could have, but there's a there's a there's a
you know, there's an opportunity here. It does look like
inflation isn't going anywhere, but down from here it would
be a surprise. So if it did bounce back up,
but you've got to remember that it would be absolutely
disastrous to cut and then have inflation bounce back up.
You know, that would just blow on our minds and

(03:27):
be too much want to cope of the cycle. So
they do, they do have to be sure. But you know,
it's funny, it's such a there's so much going on.
It's almost like a long long time till Wednesday. You know,
if if we see a couple more nights at market
turmoil and so forth, that probably would be enough. You know,

(03:50):
a lot of the other economists were saying, well, that
unemployment number yesterday wasn't bad enough to justify it yet,
you know, which is a weird way of looking at it.
But it wasn't wasn't worse than expected. It was about
being unexpected, so that that might give them some reason
to hold on till October. You could end up having
to do double cuts at that point.

Speaker 1 (04:11):
Look, ultimately, they're going to get judged Liam on what
we are like when they are finished with this, and
that's not going to be good for the mything either way, Liam,
it's really really good to talk to you. Thank you
about this. Liamdan, the Herald's Business editor at large.

Speaker 2 (04:23):
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