Brad Olsen: Infometrics principal economist on the Reserve Bank keeping the OCR unchanged

Another cut to the Official Cash Rate still looks more likely than not, according to one expert.

The Reserve Bank's kept the OCR unchanged at 3.25 percent today, following six consecutive cuts.

It's waiting for more economic data, before further moves.

But Infometrics principal economist, Brad Olsen, says the bank's explicitly signalling the chance of more cuts.

"If things continue to evolve as they broadly expect, that will give them more scope to continue to cut the Official Cash Rate - maybe one or two cuts by the end of this year."

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Episode Transcript

Speaker 1 (00:00):
Right now the Reserve Bank keeping the OCR on hold
three point twenty five percent. A pause on our way
down the OCR ladder, you could say, Brad Olsen infometrics
with us. Now, Hi, Brad, good afternoon. So what is
with the pause?

Speaker 2 (00:13):
Well, it looks like the Reserve Bank is just a
bit cautious and being careful given all of the uncertainty
in the economy. Now you might think when I say uncertainty,
I mean the global ructions, tariffs and similar but actually
reading this statement from the Reserve Bank today, it seems
are just a little bit more cautious actually about the
likes of inflation, which are seeing a few bits and

(00:33):
pieces starting to get a bit hotter a bit too quickly,
but also the uncertainty over New Zealand's economic recovery. We
had at the start of this year a good increase
in GDP up point eight percent, but economic indicators since
then have been a lot more challenging. And I think
that's where the Reserve Bank they just want another couple
of months of data to figure out where things are

(00:54):
going before they make their biggot next call over where
to next for interest rates?

Speaker 1 (00:59):
Doesn't mean it's good for us but to be fair
to them, we're a two and a half percent doesn't
take your much to notch up, and then you're close
to and you're almost touching, and then before you know it,
you're over.

Speaker 2 (01:09):
Well, that's basically what we did last time. We kept
looking at the inflationary numbers and saying, look, they're not
good at the moment, but you know what, looking forward,
they'll they'll be all right. And then by the time
we figured out that they weren't all right, that inflation
was more persistent, things had gotten out of hand. But
I think also for the Reserve Bank, they're also banking
on the fact that interest rates are still down quite

(01:30):
a lot from where they've already been. You know, we've
seen two point two five percentage points lopped off the
ocr over the last year and a bit. That means
that for a lot of people, yes, interest rates are
still they might be paying those high rates, but they
will be refixing at some point over the second half
of this year. A lot of the heavy liftings being done.
But the Reserve Bank trying to now calibrate what's the

(01:53):
right point, And to be fair Ryan, they also reckon
that there is more to come. They were quite explicit
today that if they continue to evolve as they broadly expect,
that will give them more scope to continue to cut
the official cash rate this year. I just don't think
there's too much more left in that. There's probably only
a few more tweaks, maybe one or two cuts by
the end of this.

Speaker 1 (02:13):
Year, get us down to three two point seventy five
something like that. Brad, appreciate you. Brad Olson, Infametric's principal economists.
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