Nick Tuffley: ASB Chief Economist on what US tariffs mean for our mortgage rates, and OCR review next week

Another major bank has advice for mortgage holders ahead of The Royal Bank of New Zealand official cash rate decision new week.

The Royal Bank of New Zealand is expected to cut the OCT by 25bp to 3.50% on April 9.

Westpac said the decision to cut is the wrong one.

ASB Chief Economist Nick Tuffley talks to Ryan Bridge about the decision.

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Episode Transcript

Speaker 1 (00:00):
So Trump's tariffs are heading countries all over the world.
You might be wondering what this means for mortgage interest rates. Well,
we've got the Reserve Bank here reviewing the OICR next Wednesday.
Economists still expecting that we will get a twenty five
basis point cuts at Nick Tuffley's with us Asbchief Economist
Nick Good evening. Oh, so you think no change to
what was expected or what was being expected after what's

(00:24):
happened in the US.

Speaker 2 (00:26):
Well, yes, we think that the Reserve Bank's still going
to be pretty comfortable that interest rates me to go
a bit lower, and we see them cutting by twenty
five points next week and still cutting by twenty five
in May. I think what's been happening locally is fairly
consistent with the reserve banks view their inflations under control
enough to cut down to about three and a quarter percent,

(00:49):
and the reserve banks, like everybody else, kind of it
on the sidelines, waiting to see just what sort of
carnage comes out of the train wreck from Donald Trump.

Speaker 1 (01:00):
What is it going to do inflation? I mean, it's
all crystal ball gazing at this point, isn't it. But
what do you expect well.

Speaker 2 (01:08):
Our hunch is that sort of in the short term
we may well get some slight inflation impacts when you're
looking outside over the next year, but longer term, the
dominant impacts could be slightly negative. So you're kind of
breaking it up into In the short term, you could
have the new Zealand dollar weekend, which could push import
prices up. Some things that we buy may get caught

(01:30):
up in all the supply chain added expenses from tariffs,
and those things could go up to we're importing stuff
from the States, but you could also get stuff coming
in from places like China, Canada, other countries where they've
been clubbed by tariffs and they're are pretty desperate to
sell their stuff elsewhere. So there's a lot of mixed
influences in the short term. Longer term, if our exports

(01:52):
do get a bit affected, then those sort of more
longer capacity related inflation pressures could be a bit damper
in the longer term, and the reserve thing is going
to be focusing on where are things going to be
a year or two from now, not say over the
next year.

Speaker 1 (02:06):
Then there's the I mean you mentioned imports and potentially
importing inflation but then you look at the price of
oil today, you know, and that the fact that opec
plus is cranking up the supply.

Speaker 2 (02:17):
Yes, and that's the thing that you've got. You've got
a lot of lot of influencers.

Speaker 1 (02:20):
Competing from the competing forces.

Speaker 2 (02:23):
Yeah, quite exactly, but different timeframes as well. And I
think when we're looking at okay, what does this mean
for the Reserve Bank, they're trying to keep the lid
on inflation. Some of these influences on inflation could be
quite short terms. So all price changes, exchange rate impacts,
any sort of lifts and import costs in the short
term tend to kind of peter out within say about

(02:44):
a year, and so it's that those impacts that could
linger on, which is more particularly if our export sectors
start to feel a bit of pressure and they cut
back on spending, they don't have the revenue to invest
or spend. Influencers from there are likely to be the
ones of the Reserve. Thanks focuses on a lot more
and just kind of looks through anything that's a bit

(03:04):
shorter term.

Speaker 1 (03:06):
Nick, Thanks for that. Nick Tuffley, asb Chief Economists the
ICR announcement of you made next Wednesday. For more from
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