July 17, 2024 • 5 mins
ANZ is the latest major bank to bring their interest rate cut predictions forward as the mood towards the economy changes.
The bank has forecasted a 25 basis point rate cut from the Reserve Bank by November of this year.
ANZ Chief Economist Sharon Zollner says today's dip in inflation shows the tide is turning.
"While it's true that domestic inflation is a smidge higher than the Reserve Bank expected, it looked like it was just technical factors - and the other part of inflation, the important bit, was lower."
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Episode Transcript
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Speaker 1 (00:00):
Jack Team and A and Z is forecasting a twenty
five basis point rate cut from the Reserve Bank in
November of this year, so they've brought for their previously
forecasted cut. They thought the first cut was going to
be coming from the RB and Z to the OCR
in February of twenty twenty five. It comes off the
back of today's inflation data, the CPI dipping to a
(00:20):
three year low three point three percent for the June quarter.
It still remains outside of the reserves Reserve Banks target band,
of course one to three percent, but you would have
to say it's getting very close. Indeed, A and Z
chief economist sharon's Olner is with us skald A. Good evening.
Oh you're going to sleep easy tonight. Good news.
Speaker 2 (00:38):
Eh, yeah, everyone was good news. I mean, while it's
true that domestic inflation was a midch high and the
Reserve Bank expect that, it looked like it was actually
just technical factors and the other part of inflation, the
important bit was lower. So yeah, overall, I think it's
confirmed the vibes that things are more under control than
the Reserve Bank feared back in May.
Speaker 1 (00:58):
And it was low enough for you to upgrade your.
Speaker 2 (01:00):
Forecast, Well, yeah, it would roll forward our forecast for
when the Reserve bankill cut.
Speaker 1 (01:06):
Up grade from our perspective shower.
Speaker 2 (01:09):
Yes, certainly. I think businesses are looking for some light
at the end of the tunnel, and if that could
be this year, then I think that would be good.
The market is convinced that they'll be coming earlier in
that they're putting fifty odds on a cut as soon
as next month, maybe getting ahead of themselves there. But
we'll see what the unemployment rate does in the data
that's out a week before that.
Speaker 1 (01:29):
So what do you think we would need to see
to see either a twenty five basis point cut next
month or fifty basis points across this year.
Speaker 2 (01:41):
So the Reserve Bank will cut when they're convinced that
information is going to return to two percent and then
stay with them the band, so they've got a bit
of a buffer to absorb the inevitable surprises that will
come along. So for them to cut sooner than November,
I think we would need them to basically acknowledge a
mistake that they already should have been cutting by now.
(02:02):
Possibly they could always cut fifty points later, but if
say the unemployment rates shot much higher than expectations that
could do it. That's the only data they'll have really
before August, apart from the usual monthly reads like the
business surveys and the like. But before October there'll be
a bit more data in the bag. Before November, they'll
have the whole suite of everything. So it's just how
(02:24):
they weigh up that desire for certainty with the risk
of holding rates too high for too long and causing
unnecessary pain.
Speaker 1 (02:31):
You mentioned the non tradeable still at five point four
percent for you know what we often deem as being
domestic inflation. Why is that still so high.
Speaker 2 (02:40):
Yeah, the reserve banks thought it would be four point
one percent by now when they stopped hiking, so that's
still a big gap. But yeah, there's some key things
like rents, rates and insurances, for example. But as the
general price increase across the economy falls and those things
will to get stranded on the on the top side,
and if their outliers and there, reserve will be able
to look through them. So essentially we expect the Reserve
(03:02):
Bank to stop talking more about the headline level of
inflation and start to talk more about the core inflation
measures because they should have a bit more space to
look through stuff now that it looks like they're winning
the war.
Speaker 1 (03:16):
Yeah, does anything in today's numbers give you cause for anxiety?
Speaker 2 (03:22):
No, not really. I mean there was some solid progress,
I would say. I mean, yes, it is disappointing that
non tradable inflation hasn't fallen more over the last year,
but there's good science going forward if you look at
what firms are saying about their costs and their prices,
that sort of thing. It's still taking a while, but
there was nothing in today's data that suggested that the
(03:43):
economy needs to go through more pain than we thought
to beat inflation, which was definitely the tone of the
Reserve Bank's Mantras policy statement in May.
Speaker 1 (03:51):
And do you feel confident that in three months time,
when we're looking back at the September quarterly data, we
will be comfortably within the Reserve Bank's target band.
Speaker 2 (04:00):
It's looking like it at the moment, But of course
you never say that with one hundred certainty, because if
there was a sudden million oil shocks, for example, that
the headline numbers could move around quite quickly.
Speaker 1 (04:12):
Damn it, Sharon, I shouldn't have put that as my
last question this eving, But thank you very much for
your time. We appreciate it. Sharon Zolder, who is of
course ain Z's chief economists, and she had a nice
Sharon about this. But ain Z has dropped some of
its home loan and term deposit rates, and this comes
after Westpac I think, lowered some of their rates last week.
So ain Z's decreased its home loans with a thirty
(04:35):
basis point drop on their two year special rate. That's
down to six point four to nine perandom of twenty
nine point basis drop on the one year special rate
to six point eight five. I've got to reset in October.
So what do we think end of October? Throw this
open to the wisdom of the crowds. The thing is
that once they start cutting, the real question is how
quickly are they going to cut and how far are
(04:57):
they going to go? Right, Because even if the Reserve
Bank does cutting in November of this year, if it's
only twenty five basis points, and we've got to wait,
you know, a full year until we see or maybe
longer until we see one hundred basis points off that
OCRs that stands right now, then that's still a lot
more pain in the economy. It's a delicate balance for
(05:18):
the Reserve Bank as they try and make sure they
don't breathe too much life back into economic activity. For
more from Heather Duplicy Alan Drive, listen live to news
Talks it'd be from four pm weekdays, or follow the
podcast on iHeartRadio.
Jack Team and A and Z is forecasting a twenty
five basis point rate cut from the Reserve Bank in
November of this year, so they've brought for their previously
forecasted cut. They thought the first cut was going to
be coming from the RB and Z to the OCR
in February of twenty twenty five. It comes off the
back of today's inflation data, the CPI dipping to a
(00:20):
three year low three point three percent for the June quarter.
It still remains outside of the reserves Reserve Banks target band,
of course one to three percent, but you would have
to say it's getting very close. Indeed, A and Z
chief economist sharon's Olner is with us skald A. Good evening.
Oh you're going to sleep easy tonight. Good news.
Speaker 2 (00:38):
Eh, yeah, everyone was good news. I mean, while it's
true that domestic inflation was a midch high and the
Reserve Bank expect that, it looked like it was actually
just technical factors and the other part of inflation, the
important bit was lower. So yeah, overall, I think it's
confirmed the vibes that things are more under control than
the Reserve Bank feared back in May.
Speaker 1 (00:58):
And it was low enough for you to upgrade your.
Speaker 2 (01:00):
Forecast, Well, yeah, it would roll forward our forecast for
when the Reserve bankill cut.
Speaker 1 (01:06):
Up grade from our perspective shower.
Speaker 2 (01:09):
Yes, certainly. I think businesses are looking for some light
at the end of the tunnel, and if that could
be this year, then I think that would be good.
The market is convinced that they'll be coming earlier in
that they're putting fifty odds on a cut as soon
as next month, maybe getting ahead of themselves there. But
we'll see what the unemployment rate does in the data
that's out a week before that.
Speaker 1 (01:29):
So what do you think we would need to see
to see either a twenty five basis point cut next
month or fifty basis points across this year.
Speaker 2 (01:41):
So the Reserve Bank will cut when they're convinced that
information is going to return to two percent and then
stay with them the band, so they've got a bit
of a buffer to absorb the inevitable surprises that will
come along. So for them to cut sooner than November,
I think we would need them to basically acknowledge a
mistake that they already should have been cutting by now.
(02:02):
Possibly they could always cut fifty points later, but if
say the unemployment rates shot much higher than expectations that
could do it. That's the only data they'll have really
before August, apart from the usual monthly reads like the
business surveys and the like. But before October there'll be
a bit more data in the bag. Before November, they'll
have the whole suite of everything. So it's just how
(02:24):
they weigh up that desire for certainty with the risk
of holding rates too high for too long and causing
unnecessary pain.
Speaker 1 (02:31):
You mentioned the non tradeable still at five point four
percent for you know what we often deem as being
domestic inflation. Why is that still so high.
Speaker 2 (02:40):
Yeah, the reserve banks thought it would be four point
one percent by now when they stopped hiking, so that's
still a big gap. But yeah, there's some key things
like rents, rates and insurances, for example. But as the
general price increase across the economy falls and those things
will to get stranded on the on the top side,
and if their outliers and there, reserve will be able
to look through them. So essentially we expect the Reserve
(03:02):
Bank to stop talking more about the headline level of
inflation and start to talk more about the core inflation
measures because they should have a bit more space to
look through stuff now that it looks like they're winning
the war.
Speaker 1 (03:16):
Yeah, does anything in today's numbers give you cause for anxiety?
Speaker 2 (03:22):
No, not really. I mean there was some solid progress,
I would say. I mean, yes, it is disappointing that
non tradable inflation hasn't fallen more over the last year,
but there's good science going forward if you look at
what firms are saying about their costs and their prices,
that sort of thing. It's still taking a while, but
there was nothing in today's data that suggested that the
(03:43):
economy needs to go through more pain than we thought
to beat inflation, which was definitely the tone of the
Reserve Bank's Mantras policy statement in May.
Speaker 1 (03:51):
And do you feel confident that in three months time,
when we're looking back at the September quarterly data, we
will be comfortably within the Reserve Bank's target band.
Speaker 2 (04:00):
It's looking like it at the moment, But of course
you never say that with one hundred certainty, because if
there was a sudden million oil shocks, for example, that
the headline numbers could move around quite quickly.
Speaker 1 (04:12):
Damn it, Sharon, I shouldn't have put that as my
last question this eving, But thank you very much for
your time. We appreciate it. Sharon Zolder, who is of
course ain Z's chief economists, and she had a nice
Sharon about this. But ain Z has dropped some of
its home loan and term deposit rates, and this comes
after Westpac I think, lowered some of their rates last week.
So ain Z's decreased its home loans with a thirty
(04:35):
basis point drop on their two year special rate. That's
down to six point four to nine perandom of twenty
nine point basis drop on the one year special rate
to six point eight five. I've got to reset in October.
So what do we think end of October? Throw this
open to the wisdom of the crowds. The thing is
that once they start cutting, the real question is how
quickly are they going to cut and how far are
(04:57):
they going to go? Right, Because even if the Reserve
Bank does cutting in November of this year, if it's
only twenty five basis points, and we've got to wait,
you know, a full year until we see or maybe
longer until we see one hundred basis points off that
OCRs that stands right now, then that's still a lot
more pain in the economy. It's a delicate balance for
(05:18):
the Reserve Bank as they try and make sure they
don't breathe too much life back into economic activity. For
more from Heather Duplicy Alan Drive, listen live to news
Talks it'd be from four pm weekdays, or follow the
podcast on iHeartRadio.
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