Stephen Toplis: BNZ Head of Research on the bank expecting a 25 basis point increase to the OCR

It's thought another split vote could be on the cards for today's OCR decision.  

The Reserve Bank will announce its decision at 2pm.  

BNZ Head of Research Stephen Toplis expects a 25 basis point increase, taking it from 2.25% to 2.5%.  

He told Mike Hosking the war in Iran has increased uncertainty about the economy's future.  

Toplis says banks have already priced in three rate hikes to their mortgage rates – only those on a floating rate should see a major shift. 

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Episode Transcript

Speaker 1 (00:00):
So the Reserve Bank back to day to update us
on there thinking as to the state of New Zealand,
inc of the field is split around the cash right
Stephen Topless, ben Zi's head of researchers with a Stephen morning,
Good morning. How bullish on a high car are you?

Speaker 2 (00:13):
I mean, we're reasonably confident that rates will go up.
But I guess in some ways people are asking or
talking about the wrong thing here, and that's you know,
whether or not we go today. I mean, the more
important questions I think everyone needs to get their heads
around is that even the most dubbish forecaster still thinks

(00:33):
that rates are going to go up across the rest
of this year. And that's what people have got to
get their heads around.

Speaker 1 (00:39):
Do you think, though, there's a fragility amongst many of
us that if we went today, we'd go it's not
as good as we thought it might be, and you
mess with us.

Speaker 2 (00:50):
Very true. I mean there's a fragility about everything about
the economy at the moment. People do fear rate increases,
but you know, I stress that three rate increas are
already priced into the market. So when you're thinking about
your mortgage rates and your cost of borrowing. Generally, unless
you're on a floating rate, you're not likely to see
a substantial move in those rates, given that it's already

(01:13):
priced in. There might you know, there might be ten
basis points of the margin yet, but we're not talking
huge moves.

Speaker 1 (01:18):
Do you reckon there'll be a split vote again today?

Speaker 2 (01:22):
Yeah? Quite conceivably, And you know, to be to be fair,
they went into the last meeting in the midst of
an oil shock and trying to work out what the
hell that meant, And now they're going into a meeting
where it looks like it's all done and dusted, but
nobody's certain. So it's it's it's a really difficult position

(01:42):
to be in. I wouldn't be surprised if it's split,
but I think there's less likelihood.

Speaker 1 (01:48):
What's the commentary do you think? Have have they misread it?
Or have we all misread it to it agree that
what we thought would be the fallout from the war
hasn't eventuated in to the extent that we thought.

Speaker 2 (01:59):
What Yeah, I'm not sure that any of us really
knew what was going to happen other than it's going
to damp and growth. We can put direction on it.
We couldn't put numbers on it. But I think the
important fact here is that prior to the war, we
were starting to see genuine signs of growth in the economy.

(02:21):
The momentum was picking up, very very easy monetary conditions
that we had were starting to do their work, and
then we got hit by the war, and now it's
basically reversed. So we're still back in a position where
there's momentum in the economy and most of the leading
indicators that we're looking at now ahead in the right direction.
And the last thing a central bank wants to be

(02:43):
doing in this environment is adding to the inflationary pressures.
So all we're talking about here is in taking the
foot off the accelerator. We're not talking about them generating
monetary conditions which were genuinely slow the economy. Yeah.

Speaker 1 (02:57):
Good, and so I appreciate it very much. Steven Topless
calling a rate hike today. He's the head of B
and Z Research. For more from the Mic Asking Breakfast,
listen live to news Talks at B from six am weekdays,
or follow the podcast on iHeartRadio.