Nick Tuffley: ASB Chief Economist ahead of today's OCR announcement

Economists say pausing the OCR could be prudent as we wait to find out more about the state of global trade.  

The Reserve Bank will make a call today on whether to cut the Official Cash Rate for a seventh consecutive time or hold it steady at 3.25%.  

There's much to consider, including uncertainty about the US tariffs.  

ASB Chief Economist Nick Tuffley told Heather du Plessis-Allan we'll have more information next month about inflation and inflation expectations.  

He says hopefully all the trade deadlines will be dealt with and we'll have more clarity about what tariffs countries face.  

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Episode Transcript

Speaker 1 (00:00):
Oh cr decision out from Reserve Bank today. The consensus
from most pundits is that it's going to be left
unchanged at three point twenty five percent. Nick toughly is
asb's chief economist and.

Speaker 2 (00:08):
Is with us morning, Nick, good morning here.

Speaker 1 (00:11):
Reasonably complex decision actually today? Is there a chance we
get surprised?

Speaker 2 (00:15):
R Locke? Is every chance you get surprised In Australia
yesterday everybody was convinced the Reserve Bank they would cut
and it remained on hold. So look, you never say never.

Speaker 1 (00:23):
But you pick what staying where it is.

Speaker 2 (00:25):
We are picking that the Reserve Bank remain on hold
at this meeting. We still think they will cut further,
but that they'll wait until August because you've just got
so much more information, even hopefully thing has crossed a
bit more detail around what sort of trade impacts are
likely to wash through the world as well.

Speaker 1 (00:40):
Do you think I mean, see aside the fact that
they're most likely going to hold, do you think they
should actually hold today?

Speaker 2 (00:48):
As I was in the governor's hot seat, I'd still
be cutting interest rates. But we are getting really near
the end and it is a tough decision. So I
think for them waiting is prudent. They're getting a lot
more data around inflation and inflation expectations, so how our
behavior gets influenced via inflation is something that's key for them.
And you do get that big run of all the

(01:10):
trade deadlines hopefully fingers crossed having been dealt with, and
a lot more clarity around what tariff's people face. So
in that environment, it's understandable that they will want to wait.
There's a lot more information you get over the next
six weeks.

Speaker 1 (01:22):
Okay, why would you cut if they're not going to cut?

Speaker 2 (01:25):
Well, if I'm probably a little bit a little bit
on the dubh side. Look, I think we're looking at
an economy weird. Look, it is very slow getting going,
and well, we do think the economy will keep picking up,
but the impact of interest rates is taking quite some
time to come through, and the housing market is evident
of that. But we are reality is we're going to
be facing inflation bouncing around between two and three percent

(01:46):
over the next year or so. It's not exactly low,
and that's really why the Reserve Bank in when they
are in the hot seat and have to make the decisions,
why they are a little bit wary at the moment.

Speaker 1 (01:57):
Okay, so I see that the guys at A and
zqulling two point five percent. That's where we bottom out
early next year, around about February. What about you? What
do you think?

Speaker 2 (02:05):
We think three percent? So it's really one more cut,
But reality is you could conceivably end up anywhere between
where we are now three and a quarter and two
and a half. It really depends on how those risks
around trade go and how much of an issue the
sort of spark in inflation that we're seeing this year
will actually be. So we do think this scope for
further cuts, but we're getting near the end of the

(02:28):
reserve banks run of cutting rates from what was a
pretty high level.

Speaker 1 (02:32):
Good stuff, Nick, good to talk to you. Thank you,
Nick Tuffley asb Chief Economist. For more from the Mic
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