Jarrod Kerr: Kiwibank chief economist ahead of the next OCR announcement

The Reserve Bank is set to make another Monetary Policy Statement on Wednesday, and experts have predicted another 25-basis-point cut.

The cut, priced in by financial markets and widely expected by economists, would take the OCR to 3.25 percent.

Despite this, Kiwibank chief economist Jarrod Kerr believes the Reserve Bank should cut the cash rate down to 3 percent - saying the economy needs stimulus.

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Episode Transcript

Speaker 1 (00:00):
Now.

Speaker 2 (00:00):
Kiwibank says if it was up to them, the ocr
would be going down all the way to three percent
on Wednesday. The cash rates currently at three and a
half percent. The Reserve Bank is widely expected to cut it.
Jeri Kerr is Kiwibank's chief economist.

Speaker 1 (00:12):
Hi Jared Good evening, what.

Speaker 2 (00:15):
Do you expect in just twenty five basis points on Wednesday?

Speaker 1 (00:19):
I'll delivered twenty five. But they should lower the rack
and they are willing to cut below three percent? Does
the economy needs stimulus not restraint?

Speaker 2 (00:29):
Why is there so much uncertainty about where this track
is going.

Speaker 1 (00:34):
Well, there's a lot of uncertainty offshore. So the way
we're looking at it is that these tariffs, no matter
how much they get dialed back and turned back towards
ten percent, still a tariff across the world. Still slower growth.
We think that's a negative and we also think it
puts deflationary pressure on the economy. So yeah, we don't

(00:57):
agree with the risks of upside.

Speaker 2 (01:01):
What does the budget do do you think for the
Reserve Bank? Does it give it latitude to cut deeper?

Speaker 1 (01:06):
Yeah, it does. You have a government that is doing
a little bit with the with the invest boost, which
is great, but that won't that won't you change the
dial too much. They are not pumping a lot of
money into the economy at all, and they've got quite
a lot of restraint later on. So it actually falls
into much of policy to do something to get this

(01:28):
economy going.

Speaker 2 (01:29):
Okay, So when do you think you reckon? It needs
to bottom out about two and a half percent, is
that right?

Speaker 1 (01:35):
Yeah?

Speaker 2 (01:36):
And when.

Speaker 1 (01:38):
The early is possible by the middle of this year.
We have a theoretical number for neutral, which is a
rate that doesn't hurt, doesn't stimulate, and that's about three.
So sitting at three and a half now, we're actually
still in territory where interest rates are restraining growth, even
though we've been through a recession. So we're saying, actually
get it into stimatory territory and you know, let's kick

(01:59):
start there kind of into next year.

Speaker 2 (02:00):
Jared, it's always good to talk to you. Thank you, mate.
That's Jared kirk hue, Banks, chief economist. For more from
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