Steve Jurkovich: Kiwibank CEO on what the inflation rate could mean for interest rates

The latest inflation rate is giving confidence to cut interest rates.  

Stats NZ figures show the inflation rate for the year to December hasn't changed, sticking at 2.2%, well within the Reserve Bank's target band.  

Kiwibank Chief Executive Steve Jurkovich told Ryan Bridge their two-year mortgage rate is expected to come down half a percent over the next few months.  

He says it'll vary by term, but he thinks we will see rates around 5%. 

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Episode Transcript

Speaker 1 (00:00):
Right, we have a number. Inflation is unchanged two point
two percent for the year of December, non tradeables coming down.
Economists and the pundits still picking a half a percent
o CR cut next month. So does this give the
banks some confidence start dropping rates? Steve Yukovic is the
QI Bank CEOs with me this morning. Steve, Good morning,
morning Ron. Does it give you confidence?

Speaker 2 (00:21):
Yeah? It does? And I think you know where we
price rates from, which is the two year mark, is
actually looking pretty stable. So I think you know, we've
seen some cuts over the last couple of weeks. I'd
expect after this number we'll see some more cuts next week.
From you, yeah, I think so it looks very very
likely for us, but I also think all banks will
be in the same. But waiting for that CPI number,

(00:41):
seeing that it's sort of very very close to that
RBN zed target being at two percent, I think gives
ritten a bit of confidence.

Speaker 1 (00:48):
Are you worried about I mean, obviously the non tradeable
coming down starting to come down is good, but are
you worried about the exchange rate?

Speaker 2 (00:55):
Here we are, I mean, for your listeners, the fact
that our interest rates are coming down. New Zealand dollar
less attractive, which means everything that we import, like petrol
and things like that goes up in price. So yeah,
that is a worry, But ultimately it looks like people's
confidence is picking up slightly and we think the second
half of this calendar year will be much better.

Speaker 1 (01:15):
So you think you'll bring your two year rate down
next week? How low do you think you'll go?

Speaker 2 (01:21):
Well, I think we should expect to see it come
down by half a percent, you know, over the next
I think next two to three months. So you know
that we're really confident that we're going to see a
fifty point cut in February, as you mentioned.

Speaker 1 (01:32):
So you'll be down around five Yeah, I think.

Speaker 2 (01:35):
That's where the rates are going to come down. I mean, well,
obviously vary by two, but I do think you know,
we're going to see sea rates around the five percent
mark for sure by when. Well, I think we're going
to see a cut in February of half a percent.
I think it's a little less certain about whether the
next cut is twenty five points and whether it happens
in April or May, but I think that trend is
absolutely that we're going to see an OCR around you know,

(01:58):
three point twenty five percent something like that.

Speaker 1 (02:00):
But are you saying that that will that will you know,
percent for percent cut your mortgage rates too?

Speaker 2 (02:06):
Yeah? I think so. I mean, it won't happen all
in one cut, I don't think, Ryan, But I do
think that's where how rates will come down.

Speaker 1 (02:12):
Okay, interesting, your one year rate, you haven't I noticed
you didn't move it last time five point seven nine percent?
Why didn't you move that when you move the others?
And do you think that will change this time around?

Speaker 2 (02:22):
Yeah? I think so. I mean, ultimately the shorter term
rates like OCA helped that shorter term and mortgage rate
come down. So you know, there was still a little
bit of uncertainty about the CPI and so we've got
that number in the bag now, so we know what
we're dealing with. So I think, you know, we will
see rates come down across the board. But I do think,
you know, longer term, maybe in a couple of years time,

(02:42):
we're sort of it's a little less certain about you know,
whether the rates are sort of going to hang around
where they are now.

Speaker 1 (02:49):
Do you what's going to happen to them?

Speaker 2 (02:51):
Well? I think you know, we you could see inflation
start to creep back in. You know, we see a
bit more activity. The lower dollar will as you say,
for tradeaballs and any anything important will be more expensive.
That sort of seas inflation creep in. But I mean,
if you look at what was involved in the CPI
and some of where you know the upward trenders, you know,
some quite nasty stuff their household so rentals, rental rates

(03:14):
were still at four point two percent. You know, things
you can't control, like council rates were up twelve percentF
he is internationally app six point six percent, domestic if
he is at nine point three percent, so you know,
offset by say vegetables because of the season coming down
by eleven and a half percent. So there's quite a
lot of moving parts. So you know, I think, as
I say, confidence coming back, and I think that's positive.

Speaker 1 (03:35):
Steve, thank you for that. Steve Yukovich KEEI Bank CEO
with us. If you're looking to get a home loan,
I guess the message is that rates will be coming
down next week potentially for Keevy Bank. For more from
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