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Speaker 1: The predictable happens. The OCR stayed steady, but there could

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Speaker 1: be good news in there. Maybe the Reserve banker's hinting headlight,

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Speaker 1: inflation could return to its three percent target within a

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Speaker 1: matter of months, and that is a shift from earlier forecasts.

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Speaker 1: There were just a few words. They were just a

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Speaker 1: bit different, but they were positive, and former Reserve Bank

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Speaker 1: economists Michael Riddell joins me. Now, hello, Michael Andrew, are

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Speaker 1: you full of confidence now?

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Speaker 2: Not in the Reserve Bank or in the economy. I mean,

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Speaker 2: yesterday's statement was certainly a shift in the right direction,

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Speaker 2: but it was a real lurch. You know. It was very,

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Speaker 2: very different in tone from the statement they brought out

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Speaker 2: only six weeks ago, which was then talking about possible

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Speaker 2: rate hikes later this year and not even beginning to

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Speaker 2: cut into August next year. So you know, it's all

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Speaker 2: over the place. Shift in the right direction.

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Speaker 1: So let's just talk about those words. They said that

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Speaker 1: the OCR needed to They used to say that the

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Speaker 1: OCR needed to stay They said this time, sorry, the

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Speaker 1: OCR needed to stay higher for longer. Now the OCR

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Speaker 1: needs to stay restrictive. So that's enough to create all

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Speaker 1: this sort of optimism that.

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Speaker 2: And a whole bunch of other stuff in the wording

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Speaker 2: of the statement. The overall tones of the statement are

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Speaker 2: very very different. They now explicitly talking about the fact

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Speaker 2: that they'll start easing as the inflation pressures, whereas last

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Speaker 2: time around it was much more cletarly quickly either way,

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Speaker 2: and then Think their Central podcast was.

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Speaker 1: Further, Yeah, we're all desperate for a fall. I see

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Speaker 1: that some predicted. Almost everybody's predicting a November fall and rates,

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Speaker 1: and possibly a bigger one than previously expected. Would that

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Speaker 1: be fair?

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Speaker 2: Yeah, I mean, I think it's the timing that's changed more,

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Speaker 2: and in fact people aren't rolling out now. The possibility

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Speaker 2: of cutting August depends a lot on what next week's

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Speaker 2: CPI does. If the inflation numbers come through quite comfortably,

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Speaker 2: then this rhetoric yesterday would be consistent with beginning to

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Speaker 2: move at that point. But yeah, November seems like it's

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Speaker 2: more or lest in the bag now you would have.

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Speaker 1: Thought, okay, but are you not thinking about a smaller

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Speaker 1: one in August? Or is that too much?

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Speaker 2: I think most likely when they begin they'll start with

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Speaker 2: twenty five point adjustments. I think if they were to

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Speaker 2: go with a fifty point right off. That would probably

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Speaker 2: be criticized again as not having laid the ground for

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Speaker 2: a properly, being quite inconsistent with the last monetary policy statement,

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Speaker 2: and so on and so forth. But these guys do lurch,

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Speaker 2: so nothing would be entirely surprising.

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Speaker 1: Okay, and you mentioned the CPI. The CPI is out

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Speaker 1: next week, and we've had some inflation, good signs about

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Speaker 1: inflation from various figures that have come out over the

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Speaker 1: last little while. What do you think is happening there?

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Speaker 2: I mean, I think it is chaining down that you know.

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Speaker 2: The point the Reserve they're used to write six weeks

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Speaker 2: ago was there are some price areas where prices are

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Speaker 2: holding up rates and insurance. It's just that those have

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Speaker 2: got nothing much to do with monetary policy. They're what

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Speaker 2: we call them the jargon supply shocks. Things at the

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Speaker 2: Reserve Bank should more or less look through and focus

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Speaker 2: on those things that are driven by the state of

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Speaker 2: the economy. The economy is very weak. The Reserve Bank

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Speaker 2: statement acknowledges that yesterday it looks like inflation is really

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Speaker 2: beginning to for the way quite sharply. But there'll be

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Speaker 2: ups and downs, as there have been in a bunch

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Speaker 2: of other countries an evita.

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Speaker 1: Well, there we go. Everyone always tempers their predictions with

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Speaker 1: depending on the situation globally, and we saw some bad

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Speaker 1: confidence figures out of Australia the other day. So what

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Speaker 1: do you think we're seeing globally and could it affect

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Speaker 1: our return to lower rates in November.

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Speaker 2: I hope the global picture broadly is heading in the

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Speaker 2: support of direction. You know, we're seeing global economy slowing.

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Speaker 2: That's not surprising with intrastrates having been at these sort

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Speaker 2: of highest levels for fifteen years. For a year or

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Speaker 2: two now Australia is a bit of an exception. They

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Speaker 2: probably haven't got rates high enough to get inflation comfortably down,

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Speaker 2: and so their economy and labor market are still running

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Speaker 2: on reasonably strongly, and that's one of the reasons why

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Speaker 2: there's such a big outflow you Seeland to Australia at

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Speaker 2: the moment. But broadly the environment is just a vertically different,

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Speaker 2: more favorable place for getting inflation down than it was

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Speaker 2: a year or especially two years ago.

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Speaker 1: All right, good stuff, and I thank you so much.

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Speaker 1: That is Michael Riddell, who is a former Reserve Bank economist.

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Speaker 2: For more from The Mike Asking Breakfast.

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Speaker 1: Listen live to News Talk Set B from six am weekdays,

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