Jerrod Kerr: Kiwibank Chief Economist seeks further OCR cuts ahead of today's announcement

A senior economist says he'd like to see a series of OCR cuts. 

The Reserve Bank will announce its decision at 2pm today.  

Kiwibank Chief Economist Jarrod Kerr is expecting to see a 25 basis point cut.  

He told Mike Hosking after a cut today, he'd like to see two more to get the OCR to 2.5%.  

Kerr says that sort of stimulation is what we need to pull us out of recession. 

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Episode Transcript

Speaker 1 (00:00):
To write another ocr day. Everyone seems to see the
twenty five points being cut from the cash rope, but
the real story, of course, is the commentary. Does the
bank think they've done the job or is there more
where that came from? Today, Jared Kirky, who Bank's chief economist,
is back with us. Jared, very good morning to you.

Speaker 2 (00:13):
Good morning, mind.

Speaker 1 (00:14):
I must congratulate you because you've been consistent over the months.
You've said fifty to fifty to fifty points and you
need some more help from the bank. Do you think
ultimately you will be proved to be right?

Speaker 2 (00:25):
I think we're getting close to the bottom and I
think that's where we need to be, and it's what
we've been calling for.

Speaker 1 (00:33):
So, yeah, twenty five today with how many more? One
or two?

Speaker 2 (00:38):
Another? Two?

Speaker 1 (00:40):
So that gets us down to what two? Five? Two
point five?

Speaker 2 (00:43):
Yeah exactly. And while we're saying that, is that we
think neutral is a round three and a slightly symmetry
setting is what we need.

Speaker 1 (00:52):
Right, So do they see that? And if they don't
see it, could they have done it quicker?

Speaker 2 (00:58):
They could have done it quicker. I mean last meeting,
which I don't think was the right decision, and here
we are cutting today. I do think they get it.
Their current ocr track, which is their forecast, suggests that
they can go down to two seventy five. So we're
getting close. And I just think we need to get
us into symmetry territory to really get us out of

(01:22):
a recession.

Speaker 1 (01:23):
How much of it's psychological and how much of it's real.
I mean, we keep saying twenty five and something will
happen and then all these people are on their fixed
rates and they will go, you know, and run around.
We go, it hasn't happened, has it?

Speaker 2 (01:35):
No, not yet. You need to get interest rates to
a level where it actually kicks in and it stimulates
and it gets people talking, it gets people excited, and
we're not there. When I talk to property investors, you know,
mortgage rates at five percent, they're a lot better than
what they were, you know, seven and a half percent
last year, but they're not at levels that are enticing them.

(01:56):
Rental yields are not there. They're at three and a
half percent, they're not at five. You talk to businesses
and that's just nervous that they're not ready to go
out and invest.

Speaker 1 (02:09):
Correct. What's your vibe on Christian. Is he going to
tell us what he needs to tell us today or
is he going to play it close to his chest
so he doesn't overplay his hand. From his point of view.

Speaker 2 (02:18):
Well, he played it close to his chests in May,
which I think was the wrong decision. I think he
should have been a bit more aggressive, a bit more
pro growth. So I think we'll get a bit more
of what we saw in May today. He will cut,
he will point to the need for another one, but
he's playing his cards very close to his chest.

Speaker 1 (02:39):
Is it him or is it the committee? Or is
it both? Are they all of the similar realk They
sit in a room in Wellington's stare at spreadsheets.

Speaker 2 (02:47):
Yeah they do. That's part of the gig. And I
do think they're being cautious with what's going on overseas,
and there is a bit of residual inflation locally that
they're worried about. I think they need to look through
it this time. Next year, we think inflation is going
to be below two percent and that gives them plenty

(03:07):
of headone to cut.

Speaker 1 (03:09):
All right, let's see what happens. Appreciate your time as always.
Jared Kirky, we Bank chief economist. For more from the
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