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Speaker 1: Heather Duplicy Allen, if you're wasted the major banks to

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Speaker 1: cut their fixed mortgage rates after the OCR was dropped

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Speaker 1: last week, you might be out of luck. It looks

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Speaker 1: like the wholesale market has been surprised by the Reserve

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Speaker 1: Bank firmly ruling out any further cuts, and that's led

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Speaker 1: to a jump in wholesale interest rates. Nick Tuffley is

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Speaker 1: the ASB Chief Economist and with.

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Speaker 2: Us Hello, Nick, good afternoon.

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Speaker 3: How much of the wholesale rates up by that does.

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Speaker 2: Vary by the term, but if you're looking at compared

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Speaker 2: to right before the NPS, you're probably anywhere between say

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Speaker 2: fifteen and thirty basis points, and you're up more than

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Speaker 2: that from the lows that we got to sort of

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Speaker 2: later in October.

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Speaker 1: Okay, so what brought this on?

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Speaker 2: Well, you had the markets before the Montreal policy statement

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Speaker 2: still in effect building into wholesale rates that there was

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Speaker 2: probably about a fifty to fifty chance of a further

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Speaker 2: interest rate cut, and the Reserve Bank, I guess you

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Speaker 2: could say they left the door slightly jar to cutting

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Speaker 2: further if the economy doesn't pick up like it was,

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Speaker 2: like it's generally expected to. But they were making some

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Speaker 2: pretty clear noises that they think they're pretty much done,

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Speaker 2: and so that markets have shifted to pricing in a

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Speaker 2: much greater chance of the official cash rate going up

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Speaker 2: is the next move rather than down?

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Speaker 3: Was this clumsy from the Reserve Bank?

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Speaker 2: Well? I think I would say it's inconvenient from the

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Speaker 2: point of view that we know that there are a

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Speaker 2: number of people who will be fixing their mortgage rates

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Speaker 2: and you run the risk of we certainly put the

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Speaker 2: cost of wholesale borrowing up a bit higher as a

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Speaker 2: result of this. But the challenges lot if you've got

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Speaker 2: markets pricing in a cut and you get to a

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Speaker 2: point where that's no longer likely to happen, you are

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Speaker 2: going to get a market reaction at some point. It

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Speaker 2: just feels like we're seeing quite a market lift and

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Speaker 2: rates in every short period of.

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Speaker 1: Time, right, So what do you reckon?

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Speaker 2: Nick?

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Speaker 3: Is it up from here?

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Speaker 2: From the Reserve Bank's view, look, i think we're on hold.

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Speaker 2: From here is the most likely outcome. I mean, that

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Speaker 2: was what we were thinking before this statement.

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Speaker 3: We were just What I was meaning is if you'll

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Speaker 3: think I'm just going to wait for those fixed rates

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Speaker 3: to come back a little bit, you probably have to

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Speaker 3: factor in that they're going to go up now right.

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Speaker 2: Well, from here, I think that's the more more likely

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Speaker 2: way you're going to be I'll put it this way,

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Speaker 2: is that the drivers to push rates down further. You know,

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Speaker 2: you are looking for something to happen overseas it's not

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Speaker 2: good news, or something domestically that's not good news to

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Speaker 2: sort of really be a key catalyst for there. So

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Speaker 2: look at it is that time for people to start

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Speaker 2: looking and going Okay, look, I've been waiting for the

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Speaker 2: Reserve Bank to get to the bottom. Maybe we're there,

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Speaker 2: you know what it is this the time to start

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Speaker 2: looking at what's the right thing to do?

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Speaker 3: Yeah, Nick, thank you very much for you to im appreciated.

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Speaker 3: Nick Toughly, a'sbchief Economist.

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