July 8, 2025 • 3 mins
The Reserve Bank is expected to take a breather when it reviews the Official Cash Rate on Wednesday, before pushing on with cuts later in the year.
The central bank’s Monetary Policy Committee is widely expected to keep the Official Cash Rate (OCR) at 3.25 percent.
Westpac Chief Economist Kelly Eckhold says the central bank runs some risks if they cut at this point.
"What they risk is that the CPI, which is due later on this month, comes in uncomfortably high - and some of the data we've seen since May suggests that it is actually going to be a bit stronger than what they forecasted."
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Speaker 1 (00:00):
Central banks around the world seem to be in a
bit of a crouch and hold at the moment we had.
The US Fed haven't moved, although Trump wants them to
do desperately. Today, the RBA holding steady. Tomorrow our decision,
what will it be? Kelly Echold from Westpack is with
me tonight. Hey Kelly, Hi, how are you Yeah? You're
ready to do the business?
Speaker 2 (00:19):
Kelly, Well, we're not expecting any business to be done tomorrow.
We think we're going to leave the OCR unchanged, as
they signaled by having no bias about what was going
to happen to this meeting when they spoke to us
back in Beck in May.
Speaker 1 (00:35):
What do they risk if they do come?
Speaker 2 (00:39):
What their risk is that the CPI that's due later
on this month comes in uncomfortably high. And some of
the data that we've seen since May suggest that it
is actually going to be a bit stronger than what
they forecast back in May, and quite likely actually that
headline CPO is going to be a pretty close to
(01:01):
three piece three percent, or maybe even a bit above
it as we go through the rest of this year.
So it's quite hard, I think for an NPC that's
got a single mandate on one to three percent inflation
to be cutting rates when inflation is quite that high.
Speaker 1 (01:18):
Yeah, and then you've got the global backdrop, and you've
got Trump and all that stuff, and the things that
no one really knows about at the moment.
Speaker 2 (01:25):
Well, there's tons of uncertainty around that. I mean, generally,
I think the tail risks about what Trump has been
up to have reduced quite a lot since April and May,
and as a result, we see consensus forecasts for global
growth actually being revised up a bit. As that's been reflected.
Equity markets have been quite strong, but nevertheless, we don't
(01:47):
quite know what's going to happen. We saw all of
Trump's letters start to come out today. Some countries have
still got pretty high terrorists to deal with. We don't
know what New Zealand's going to end up with, and importantly,
we don't quite know how to negotiate. It's going to
end up with some of the uis's biggest trading partners
in Europe and China and in the year as well.
Speaker 1 (02:07):
Kelly, we're not even at neutral yet. I mean, we're
we're touching neutral, but we're not completely there yet. Do
you think we will get there this year.
Speaker 2 (02:16):
I think we could easily be at neutral now, Ryan,
and I think even the Brazerve Bank will tell you
that they don't know for sure exactly where it is.
Their range for neutral is between two and a half
and three and a half percent, and in fact, most
central banks around the world have actually got themselves into
the neutralish stone. Now, the idea of neutral, in terms
of guiding what's going to happen to interest rates from
(02:38):
here when you're already quite close to it, isn't actually
that helpful any more. What's going to be more helpful
is trying to get a good guide on where inflation
is going to go and perhaps where the economy is
going to go as well.
Speaker 1 (02:50):
On the global outlook, you know, we've got ten percent
tariffs from the US. If that's the worst that happens,
then that's probably quite a good thing. Well not a
good thing, of course, it could be zero, but kind
of got off lightly when you look at what else
is happening around the world.
Speaker 2 (03:06):
Well, at ten percent tariff in New zealand's going to
be the low end of the scale. If that's what
we end up with, and I'd say that's probably what
we are going to end up with at least for
a while. And that's the line that we've had on
that is that's unwelcome, but manageable. I mean, we've actually
had some pretty strong commodity prices in the last year
or so, so the ten percent tariff has just taken
(03:27):
a bit of a bit of cream off the top,
as opposed to necessarily leaving us in a pretty tight bind.
Speaker 1 (03:32):
Appreciate your time, Kelly Echold, Westpac chief Economists on the
decision from the Reserve Bank tomorrow. For more from Heather
Duplessy Allen Drive, listen live to news Talks. It'd be
from four pm weekdays, or follow the podcast on iHeartRadio.
Central banks around the world seem to be in a
bit of a crouch and hold at the moment we had.
The US Fed haven't moved, although Trump wants them to
do desperately. Today, the RBA holding steady. Tomorrow our decision,
what will it be? Kelly Echold from Westpack is with
me tonight. Hey Kelly, Hi, how are you Yeah? You're
ready to do the business?
Speaker 2 (00:19):
Kelly, Well, we're not expecting any business to be done tomorrow.
We think we're going to leave the OCR unchanged, as
they signaled by having no bias about what was going
to happen to this meeting when they spoke to us
back in Beck in May.
Speaker 1 (00:35):
What do they risk if they do come?
Speaker 2 (00:39):
What their risk is that the CPI that's due later
on this month comes in uncomfortably high. And some of
the data that we've seen since May suggest that it
is actually going to be a bit stronger than what
they forecast back in May, and quite likely actually that
headline CPO is going to be a pretty close to
(01:01):
three piece three percent, or maybe even a bit above
it as we go through the rest of this year.
So it's quite hard, I think for an NPC that's
got a single mandate on one to three percent inflation
to be cutting rates when inflation is quite that high.
Speaker 1 (01:18):
Yeah, and then you've got the global backdrop, and you've
got Trump and all that stuff, and the things that
no one really knows about at the moment.
Speaker 2 (01:25):
Well, there's tons of uncertainty around that. I mean, generally,
I think the tail risks about what Trump has been
up to have reduced quite a lot since April and May,
and as a result, we see consensus forecasts for global
growth actually being revised up a bit. As that's been reflected.
Equity markets have been quite strong, but nevertheless, we don't
(01:47):
quite know what's going to happen. We saw all of
Trump's letters start to come out today. Some countries have
still got pretty high terrorists to deal with. We don't
know what New Zealand's going to end up with, and importantly,
we don't quite know how to negotiate. It's going to
end up with some of the uis's biggest trading partners
in Europe and China and in the year as well.
Speaker 1 (02:07):
Kelly, we're not even at neutral yet. I mean, we're
we're touching neutral, but we're not completely there yet. Do
you think we will get there this year.
Speaker 2 (02:16):
I think we could easily be at neutral now, Ryan,
and I think even the Brazerve Bank will tell you
that they don't know for sure exactly where it is.
Their range for neutral is between two and a half
and three and a half percent, and in fact, most
central banks around the world have actually got themselves into
the neutralish stone. Now, the idea of neutral, in terms
of guiding what's going to happen to interest rates from
(02:38):
here when you're already quite close to it, isn't actually
that helpful any more. What's going to be more helpful
is trying to get a good guide on where inflation
is going to go and perhaps where the economy is
going to go as well.
Speaker 1 (02:50):
On the global outlook, you know, we've got ten percent
tariffs from the US. If that's the worst that happens,
then that's probably quite a good thing. Well not a
good thing, of course, it could be zero, but kind
of got off lightly when you look at what else
is happening around the world.
Speaker 2 (03:06):
Well, at ten percent tariff in New zealand's going to
be the low end of the scale. If that's what
we end up with, and I'd say that's probably what
we are going to end up with at least for
a while. And that's the line that we've had on
that is that's unwelcome, but manageable. I mean, we've actually
had some pretty strong commodity prices in the last year
or so, so the ten percent tariff has just taken
(03:27):
a bit of a bit of cream off the top,
as opposed to necessarily leaving us in a pretty tight bind.
Speaker 1 (03:32):
Appreciate your time, Kelly Echold, Westpac chief Economists on the
decision from the Reserve Bank tomorrow. For more from Heather
Duplessy Allen Drive, listen live to news Talks. It'd be
from four pm weekdays, or follow the podcast on iHeartRadio.
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