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Speaker 1: Question, of course, is what does this say about the

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Speaker 1: Reserve Bank, who deliberately engineered the recession that we find

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Speaker 1: ourselves in Former Reserve Bank economist Michael Radella's with us. Hey, Michael,

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Speaker 1: do you think the Reserve Bank has made a mistake

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Speaker 1: sending us to a three month summer break with an

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Speaker 1: ocr setting this high above neutral?

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Speaker 2: I mean the three months summer break as a bad

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Speaker 2: core always has been on their part. The data do

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Speaker 2: come through and they need to be able to respond.

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Speaker 2: The government tells us that, you know, they can have

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Speaker 2: emergency meetings if they need to, but it's always going

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Speaker 2: to be a very high threshold for that, so they

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Speaker 2: should have changed that calendar. The bigger question still is

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Speaker 2: they held monetary policy too tight for too long. You know,

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Speaker 2: it's only six months ago they were talking about raising

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Speaker 2: rates further. That was just clearly out to lunch.

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Speaker 1: Have we met the threshold for them coming back during

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Speaker 1: the break? Do you think No?

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Speaker 2: I don't think so. I'd be really surprised. They'll be

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Speaker 2: looking now towards the CPI coming out in the second

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Speaker 2: half of January, and they wouldn't want to do anything

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Speaker 2: before that month that's come out. But I have to

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Speaker 2: work the numbers through their forecast, and then they'll go,

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Speaker 2: it's only three weeks until I are next, and so.

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Speaker 1: What do you reckon seventy five basis point in February?

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Speaker 2: Oh, I think that's still a big call. I think

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Speaker 2: you know, they were talking pretty confidently at fifty points

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Speaker 2: in February at last, the NPS. I think that's still

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Speaker 2: the most likely move. What's more likely is that we

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Speaker 2: see a continued succession of cuts during next year. You know,

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Speaker 2: he's had a number of economists going, look, I had

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Speaker 2: fifty points in February, and then things might start to

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Speaker 2: tail off quite rapidly. I suspect what we'll see if

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Speaker 2: inflation continuing to fall away faster, and they'll need to

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Speaker 2: be cutting rates towards three or maybe even under three.

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Speaker 2: But remember the next year, what do you.

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Speaker 1: Reckon Adrian or thought when he saw that number yesterday?

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Speaker 1: Do you reckon that was what he wanted? Or may

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Speaker 1: have realized that he overcooked everything.

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Speaker 2: I'm sure it wasn't what he wanted. His focus, and rightly,

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Speaker 2: central banks always focused on the inflation numbers. Inflation has

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Speaker 2: been coming down a bit faster, and they appreciate it.

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Speaker 2: But they'd already got beat in the bag. We'll look

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Speaker 2: at that and go, oh my goodness, you know what's

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Speaker 2: happened here. Some of that, of course, is about those

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Speaker 2: revisions from statistics New Zealand. The Reserve Bank can't control that.

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Speaker 2: But some of it, standing back still, is that we

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Speaker 2: had a really big inflation probably a couple of years ago,

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Speaker 2: and it was always likely that it was going to

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Speaker 2: need something pretty naicey to get that down. In some ways,

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Speaker 2: it's puzzling that other countries haven't needed something quite so

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Speaker 2: bad yet, but there are still challenges there in the US,

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Speaker 2: for example, where they're saying, look, you know, maybe inflation

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Speaker 2: hadn't come down as far as we would have liked.

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Speaker 1: Michael's good to talk to you. Thank you, Michael Ridell,

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Speaker 1: former Reserve Bank economists. For more from the Mic Asking Breakfast,

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Speaker 1: listen live to news talks that'd be from six am weekdays,

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Speaker 1: or follow the podcast on iHeartRadio