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Speaker 1: Positive news from the Reserve Bank. Despite the OCR remaining

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Speaker 1: unchanged at five point five percent, it's hinted that interest

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Speaker 1: rate cuts could be closer than previously thought. The RB

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Speaker 1: and Z said they expect inflation to drop within the

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Speaker 1: target of one to three percent later this year. It

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Speaker 1: follows wide expectations that interest rates would remain unchanged until

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Speaker 1: next year. Sharon Zolmer is the A and Z Chief

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Speaker 1: economist and is with me now, Sharon, good morning. Has

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Speaker 1: this changed your view on when you think a rate

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Speaker 1: cut might happen?

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Speaker 2: Well, it was that bank was pretty careful to leave

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Speaker 2: all their options open. That comment about inflation falling back

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Speaker 2: in the band by the end of the year wasn't

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Speaker 2: actually you, but a couple of They did rehiterate they're

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Speaker 2: willing to change their mind, which of course they always

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Speaker 2: are and should be, but noted that rates will evolve

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Speaker 2: according to the conditions, and that they've noted that the

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Speaker 2: recent data has been weaker, so certainly that the market

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Speaker 2: jumped on it. We'd see it as tilting the risks

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Speaker 2: a little bit towards earlier cuts. But essentially it's going

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Speaker 2: to be the data that decides, and we've got the

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Speaker 2: inflation data next week. So with that and down the track,

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Speaker 2: the Reserve Bank was never going to come out with

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Speaker 2: a really really strong view because you know, why would

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Speaker 2: you when you could look a bit silly a week later.

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Speaker 2: So I think that's going to really be a very

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Speaker 2: very important piece of data.

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Speaker 1: And are you following the same strategy pretty much what

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Speaker 1: the data says?

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Speaker 2: Yeah, yeah, Well it's really really important because in the

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Speaker 2: main monetary policy statements, the Reserve Bank decided that, gosh,

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Speaker 2: maybe this economy is just so unfit it can't run

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Speaker 2: very fast at all without overheating and generating inflation. So

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Speaker 2: they revised down their growth forecast. At the same time

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Speaker 2: they revised up their inflation forecast pushed out their estimate

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Speaker 2: of when they'll be cutting. So it was like a

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Speaker 2: triple header of bad news. So hopefully we'll get some

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Speaker 2: better news next week that will make the Reserve Bank

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Speaker 2: more confident than they are winning this.

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Speaker 1: To hold your tongue. Hey, a hypothetical one for you.

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Speaker 1: If if they were to drop this talk would be

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Speaker 1: twenty five basis points. What would be the real impact

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Speaker 1: on mortgage interest rates? What would the time lag be

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Speaker 1: for people? Just so that they can get an idea

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Speaker 1: in their head.

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Speaker 2: Well, actually it's the Reserve Bank only controls the overnight

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Speaker 2: interest rate, which feeds into the floating mortgage rates. But

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Speaker 2: the interest rates out one year, two year, even out

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Speaker 2: of forrest three years, that is actually determined mostly by

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Speaker 2: what the market expects the Reserve Bank to do, and

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Speaker 2: that actually changed yesterday quite a bit. The markets will

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Speaker 2: make it will come and go a little bit, and

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Speaker 2: the data next week will be important, as I said,

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Speaker 2: but certainly in the hour following what the Reserve Bank

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Speaker 2: said yesterday, rates dropped a lot, so you could potentially

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Speaker 2: see mortgage rates to fall well in advance of when

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Speaker 2: the Reserve Bank actually moves the official cash rates, just

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Speaker 2: as the symmetric situation to when the Reserve Bank was

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Speaker 2: hiking and you saw fex rates mortgages increase well before

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Speaker 2: the OCR went up. On the other side, the sex

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Speaker 2: mortgage rates to come down before they actually start cutting.

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Speaker 1: All right, Sharon, thank you very much for that update.

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Speaker 1: Great to have you on the show. Sharon Zolner, the

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Speaker 1: A and Z Chief Economist. For more from News Talk

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Speaker 1: sed B, listen live on air or online, and keep

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