Mike Jones: BNZ Chief Economist ahead of today's OCR announcement

BNZ's the latest bank to drop its home loan rates, anticipating a change to the Official Cash Rate this afternoon.  

The Reserve Bank's expected to cut the OCR 25 basis point to 3.25%. 

Already BNZ's cut its fixed rates to as low as 4.89%, and its standard variable rate to 6.44%.  

BNZ chief economist Mike Jones told Mike Hosking today's decision should indicate the Reserve Bank's general direction, but it probably won't reveal anything too specific.  

He says that seems to be the playbook offshore, allowing it to take its time and assess the lay of the land at the next meeting. 

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
To Reserve Bank day to day. Of course, given our
straightened economic circumstances, we have the increased level of interest
in one a cut to the possibility of more cuts
than three. The commentary associated with the cut, Mike Jones
has been Zaids chief economists back with us, Mike Morning mording, Mike,
you at twenty.

Speaker 2 (00:13):
Five, we are We're like, we're in the consensus. We're
picking twenty five and maybe a small downgrade to the
Bank's forecast of where they see the OARCO going from here.

Speaker 1 (00:24):
With twenty five more to come, Well, we think.

Speaker 2 (00:28):
We might get two more twenty five point cuts after this,
so that takes the official cast rate down to two
seventy five. But I think for today it's really going
to be how the bank frames up the outlook. And
what we're seeing from central banks globally is that have
been pretty reluctant to hate anything too firm about the future.
Giving the environment, now, how do.

Speaker 1 (00:47):
You make that call? So new governor temporary, but nevertheless,
a new governor, new personality does come from a committee.
But given everyone's reluctant to say anything specific, why would
we expect them to.

Speaker 2 (01:01):
I don't think they will you know, I think it's
probably enough for this meeting to the bank for the
bank to simply deliver on the guidance that they've been
telling us, which is another twenty five point cut, and
then indicate that the general direction is still lower and
more or less leave it at that. I mean, that
seems to be the playbook offshore, and it allows them
just to take things as they come and turn up

(01:22):
to the next meeting and assess the lay of the
land at that point.

Speaker 1 (01:25):
The shadow board which I was reading yesterday, everything from
no move at all to twenty five by the bulk
two fifty. If the economists can't agree, how does the
Reserve bank and how do we know they're right?

Speaker 2 (01:38):
It's a fair question. I think it's probably that difference
in opinion is indicative of where we are in the cycle,
which is we're probably getting to the point or getting
to that low point where the bank might stop cutting
for a while and assess the lay of the land.
And at those turning points you tend to get a
bit more disagreement about what the path from here will

(02:00):
look like. And it just goes back to what we
just talked about, which is, well, I think to give
firm guidance at this point is difficult, and that's why
the bank probably just refrain from doing so this afternoon.

Speaker 1 (02:11):
This creeping thing I'm seeing around the world that's applicable
here as well, just a little bit more inflation, bit more,
bit more, bit more. How much does that worry them,
given that's their reason for begging.

Speaker 2 (02:23):
I think it's an annoyance for them. Of course they
prefer those short term indicators for inflation to flatish or lower.
But I don't think we're at the point where it's
where it's a major worry. We think inflation is still
well contained and likely to stay in that target range
for the RBS, even they're going to be much more

(02:43):
concerned about the medium term inflation trend, which at the
moment is being suppressed by by pretty weak growth here
and the flow down we're seeing offshore and global growth.

Speaker 1 (02:53):
What about the funk that we're in from the political
side of this, and it cuts good because your mortgage
goes down and I go spend some money and we
all get back to Christmas time. The role of that,
the confidence impact, yeah.

Speaker 2 (03:07):
Yeah, I mean that's a big part of part of it,
I think, and that's why I think perhaps the bank today,
the Reserve Bank, can be seen as providing a little
bit of certainty in an otherwise extremely uncertain world by
as we talked about doing or fulfilling the forward guidance cutting,
saying they're going to cut again. I think that's providing

(03:29):
borrowers and lenders alike with a bit more confidence than
they might have otherwise said.

Speaker 1 (03:35):
Right, we'll be watching with a great deal of interest.
Might appreciate it. Mike Jones, B and Z chief economists
this morning.

Speaker 2 (03:40):
For more from the Mic Asking Breakfast, listen live to
news talks it'd be from six am weekdays, or follow
the podcast on iHeartRadio.