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Speaker 1: The US FED has left interest rate steady. This morning,

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Speaker 1: here's Jerome Powell, Chair, and just very much.

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Speaker 2: In the mode of waiting to see what policies are inactive,

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Speaker 2: and we don't know what will happen with tariffs, with immigration,

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Speaker 2: with fiscal policy, and with regulatory policy. We're only just

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Speaker 2: beginning to see. Actually are not really beginning to see much.

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Speaker 2: And I think we need to We need to let

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Speaker 2: those policies be articulated before we can even begin to

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Speaker 2: make a plausible assessment of what their implications for the

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Speaker 2: economy will be.

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Speaker 1: So, in other words, with Donald Trump, what you don't know,

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Speaker 1: you don't know, and there's a lot we don't know

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Speaker 1: at this point. Liam Dan as The Herald's Business editor

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Speaker 1: at large, and he will me tonight. Hey, Liam, Goday, Ryan,

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Speaker 1: I mean the markets we're expecting a hold, right, Yeah.

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Speaker 3: No surprise. Really, you know, Jerome Powell knows about as

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Speaker 3: much as we do. As far as you know what

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Speaker 3: Donald Trump is going to actually enact. We've already you know,

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Speaker 3: we heard a lot on the campaign trail. We heard about,

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Speaker 3: you know, fifty sixty percent tariffs on China. Since inauguration,

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Speaker 3: we've heard he was going to have a ten percent

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Speaker 3: tariff on China by February one, tariffs for Canada and Mexico.

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Speaker 3: And look, it looks you know that that tariff policy

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Speaker 3: does have, you know, potentially an impact on inflation, but

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Speaker 3: you know, you just can't say it. He's got a

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Speaker 3: he's got a review of US trade policy that comes

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Speaker 3: back in April. That sounds, you know, like a sort

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Speaker 3: of sensible plan. But in the meantime he's kind of

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Speaker 3: using using tariffs as a weird diplomatic tool, as we

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Speaker 3: saw with Columbia at the weekend, and.

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Speaker 1: Quite an effective one as well.

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Speaker 3: Yeah, well it seemed to work. I mean, that's that's

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Speaker 3: that's the thing. But you know, Columbia is not a

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Speaker 3: not a big powerful nation in the grand scheme of things,

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Speaker 3: and you know, how's that going to go with Europe

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Speaker 3: or China, who would have to wait and see.

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Speaker 1: Exactly, or even India. I was reading last time Trumpason

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Speaker 1: and he hit them with they hit America back with tariffs,

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Speaker 1: and so this is potentially what you start as a

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Speaker 1: tariff war, and we all lose when that situation eventuates.

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Speaker 3: Yeah, well, I guess what we're talking about here is

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Speaker 3: what happens to inflation and interest rates. And there's three

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Speaker 3: there's three things that the economists and that fact Pale

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Speaker 3: mentioned and there you know, Trump wants to pump the

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Speaker 3: economy so as well as the tariffs, which he thinks

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Speaker 3: are good for US business. Obviously, he's talking about tax

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Speaker 3: cuts to get business humming, and he's talking about, you know,

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Speaker 3: some sort of moving regulation to get business humming. And

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Speaker 3: the thing is that that that potentially can get business

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Speaker 3: humming much faster than the actual you know, capacity of

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Speaker 3: the economy can cope with. And that's where you get

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Speaker 3: that sort of stimulus effect that we had through COVID,

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Speaker 3: and inflation comes back. Plus, the tariffs are a cost,

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Speaker 3: and they're talking about of course deporting all their cheap workers,

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Speaker 3: so that you know, there's people looking at him what

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Speaker 3: that might do to the cost of labor. And so yeah,

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Speaker 3: if unless Donald Trump's right and there's some magic economic

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Speaker 3: formulas that people don't understand, because he has said that

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Speaker 3: he knows more about this than the guys at the FED,

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Speaker 3: then there is a high probability that you know, US

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Speaker 3: station inflation stays higher and that means their rates stay higher,

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Speaker 3: and that pushes up, that pushes up the cost of

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Speaker 3: international borrowing, which unfortunately our banks still rely on because

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Speaker 3: we don't have deep enough markets here. So regardless of

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Speaker 3: what our reserve bank does, that could mean that the

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Speaker 3: mortgage rates just don't come down as much as we'd hope.

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Speaker 1: But does that does does it mean that the exchange

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Speaker 1: rate will stay favorable to our exporters?

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Speaker 3: Yeah, well, that's that's a spinoff, a good spin off,

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Speaker 3: and a nice thing about having a floating dollar. So

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Speaker 3: it's some bad news if you're looking to go on

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Speaker 3: a whole day in the in the US. And it

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Speaker 3: also isn't great for our inflation either, because it's lifting

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Speaker 3: the important cost of imported goods like most obviously oil

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Speaker 3: and petrol. But yeah, it is giving extra fair winds

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Speaker 3: to the dairy and meat exporters because they you know,

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Speaker 3: they're bringing the US dollars back into New Zealand dollars

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Speaker 3: and getting more dollars in their pocket locally. So yeah,

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Speaker 3: that's that's a sort of a stimulus, I guess for

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Speaker 3: our economy in some respects, but it's kind of balanced

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Speaker 3: out by the fact that if interest rates don't come

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Speaker 3: down as much, so it's all sort of swings and roundabouts,

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Speaker 3: and yeah, I guess we would probably be hoping overall

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Speaker 3: that the US could see some interest rates come down.

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Speaker 3: The FEDS well, you know, the experts now think maybe

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Speaker 3: just one or two cuts this year, but again they're

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Speaker 3: kind of guessing. And it also has an effect on

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Speaker 3: on the Wall Street. And so if interest rates stay high,

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Speaker 3: Wall Street is not likely to be as as good

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Speaker 3: or as strong, and that's also an issue for our

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Speaker 3: key we savers, of course, So.

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Speaker 1: Take take forecasts with a pinch of salt at the moment.

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Speaker 1: William absolutely, thank you so much for that, Liam Dan,

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Speaker 1: New Zealand Herald Business Editor at Large. For more from

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Speaker 1: Heather Duplessy Allen Drive, listen live to news talks.

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