NBR Radio special: Did the Reserve Bank make the right call? Economists go head-to-head
ASB's Nick Tuffley and ANZ's Cameron Bagrie go head-to-head on ReserveBank cuts on NBR Radio and on demand on MyNBR Radio.
Click the NBR Radio box for on-demand special feature audio: ASB's Nick Tuffley and ANZ's Cameron Bagrie go head-to-head on RBNZ cuts
Reserve Bank governor Graeme Wheeler says he believes he can probably leave the official cash rate at 2.5% for now.
While the governor left open the door to more cuts “if circumstances warrant” he also says last week’s cut, from 2.75% to 2.5%, should be enough to move price inflation back toward the middle of the 1-3% target band.
Not everyone agrees. Some economists say there will still have to be cuts to the OCR next year, probably from June onwards, while others expect the economy to strengthen and for any further cuts to be unnecessary.
ASB Bank chief economist Nick Tuffley is one who says the Reserve Bank will have to do more.
“It is about the outlook for inflationary pressures and that’s where we differ from the Reserve Bank,” he told NBR RADIO in a head-to-head debate on the issue.
That pressure will be more downward, he says: the exchange rate will probably stay elevated and the broad pressure from wages is going to be “pretty subdued” due to continued, strong, net immigration as well as lower prices from imported goods.
There will probably need to be two more OCR cuts of 25bp, he says, taking the rate to 2.0%, probably by the end of next year.
Taking a different view is ANZ Bank chief economist Cameron Bagrie, who says the pressures are finely balanced on inflation and the economic outlook right now is, after a wobble in the first half of 2015, now picking up again.
“The economy is ok. We’re not knocking it out of the ballpark but the broader economy is on track for 2.5-3% growth.”
On inflation, he says, the exchange rate will keep tradable inflation broadly in check.
“But on the domestic economy, retail, housing et al, are moving along at a reasonable clip.”
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NBR Radio
Mon, 14 Dec 2015
Mon, 14 Dec 2015
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NBR Radio special: Did the Reserve Bank make the right call? Economists go head-to-head
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