Remy Wisenberg: Milford Asset Management expert on whether the markets price in the OCR increase

The OCR has been increased for the first time in three years, and it's prompted a divided response among experts.

The Monetary Policy Committee's unanimously agreed to raise the cash rate to 2.5 percent.

Milford Asset Management's Remy Wisenberg unpacked the reactions further.

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Episode Transcript

Speaker 1 (00:00):
With us.

Speaker 2 (00:00):
Now is Remy Weisenberg of Milford Asset Management, Hi, Remy, Hi?
Have that all right? What was the market expecting going
into the OCR announcement today?

Speaker 1 (00:09):
Yes, today was actually a bit of a tricky one,
and we actually saw market participants were quite divided on
the outcome because there were pretty good arguments for either way,
a hike or a hold. But what we did see
was that a hike was more than seventy percent priced
by the market going into the announcement, two hikes fully
priced in by the end of the year, and nearly
four hikes price within the next twelve months. So it

(00:32):
wasn't really a question by the market whether the Reserve
Bank would eventually raise the OCR. It was more a
question of when, how quickly, and how many hikes. And
that's why today's messaging around future OCR decisions was really important,
because anything that's too out of sync with what the
market is expecting that can actually cause sharp corrections in
market pricing for interest rates.

Speaker 2 (00:52):
And how did the market then react after the announcement?

Speaker 1 (00:56):
Yes, so I guess because, like I said before, seventy
over seventy percent already priced in for a hike, so
it wasn't too unexpected. However, the messaging was clear that
there will be more interest rate increases, the caveat being
the timing is uncertain, so I think, overall, broadly all
in line with what the market was already thinking. We

(01:17):
did see some minor reaction in shortened interest rates, so
they rose marginally post the announcement. We saw a bit
of strengthening in the New Zealand dollar against key currencies,
but overall no drastic moves because there wasn't really anything
to drive the market to materially deviate from what it
was already pricing.

Speaker 2 (01:34):
All right, now, listen what happened with the ins and
X sorry with the SpaceX.

Speaker 1 (01:38):
So SpaceX that has joined the Nasdaq one hundred index
from yesterday now. Their shares were down six point eight
percent overnight, and the Nasdaq one hundred itself was also
down one point five percent overnight. So it's a very
tech heavy index. It includes many names that have links
to AI, including SpaceX. We also saw some big pullbacks

(02:01):
and some names in the semiconductor and chip maker space
Those stocks in particular, they've been performing pretty well year
to date, so I think some of that move might
have been explained by just that natural rotation into other
stocks as investors, they take profit and they redeploy. But
at the same time, there has also been some headline
noise around AI, so there's been questions around expectations if

(02:24):
they're too high. There's also been some questions around the
shift from token maxing to token minimizing and a few
other headlines, and I think that's caused some general AI jetters,
which has seen some of these stocks come off a bit.
But we are coming into earning season, so if we
start to see some positive updates from these companies come
out of that, that could help to ease some of

(02:44):
these AI fears.

Speaker 2 (02:45):
Interesting. Remy, thanks very much, appreciate it. Remy Wisenberg, Milford
Asset Management. For more from Heather Duplessy Allen Drive, listen
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