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Speaker 1: We're going out to Kelly Echold, who is with us

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Speaker 1: from Westpac, the chief economist there. Kelly, good morning. It

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Speaker 1: is OCR day today. We're expecting it to be held

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Speaker 1: at five and a half percent. But what are we

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Speaker 1: looking for in terms of language from the Reserve Bank today?

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Speaker 2: Well, today we think the Reserve Bank's going to keep

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Speaker 2: it pretty tight here. They advocated back in May that

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Speaker 2: they thought interestrates you have to remain restrictive for a

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Speaker 2: protracted period to get inflation down. So not very much

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Speaker 2: has changed them, I suspect, So I think it's going

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Speaker 2: to be pretty short and sweet. Perhaps some hint that

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Speaker 2: the economy has turned down a little bit based off

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Speaker 2: some of the indicators have seen since May.

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Speaker 1: And banks like ASB are predicting that there'll be a

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Speaker 1: cut in November. West Pac saying, now you still think

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Speaker 1: early next year? Is that still your view? Could that

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Speaker 1: change today?

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Speaker 2: I don't think it all changed today and it is

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Speaker 2: still view. The challenge thing for the Reserve Bank is

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Speaker 2: that they really need to see some runs on board

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Speaker 2: here with respect to getting that inflation rate down within

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Speaker 2: their target range. Clation's running at four percent, it's twice

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Speaker 2: the target and whilst we're all hoping that there'll be

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Speaker 2: some interest rate relief sometime soon. The reality is that

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Speaker 2: inflation way girl by itself. It's it's going to require

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Speaker 2: that period of tight conditions, flat economic activity so that

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Speaker 2: we can actually get to where things have been forecasted.

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Speaker 1: What about this issue of non tradable inflation that keeps

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Speaker 1: wearing its head that actually the reserve banks blunt tool

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Speaker 1: isn't working for for things like you know, council rate increases,

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Speaker 1: et cetera.

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Speaker 2: Yeah, well, it takes a bit of time I think

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Speaker 2: for some of these things to happen. I mean the

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Speaker 2: particular issues. I guess that the council rates and also

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Speaker 2: the insurance charges as well. You know, the typical lags

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Speaker 2: on those things are a little bit longer, and that's

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Speaker 2: why we've been sitting here with these interest rates for

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Speaker 2: a relatively long period of time compared to previous cycles.

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Speaker 2: But the fact that the economy has responded to interest

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Speaker 2: rates gives you confidence that is going to have an impact.

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Speaker 2: But it's just going to take time. And it's that

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Speaker 2: message of the time required to have to keep interest

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Speaker 2: rates at this level is the key message that the

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Speaker 2: Reserve Bank has really been telling.

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Speaker 1: Us all right, so we've looked for the language today,

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Speaker 1: but it will be around the edge. Is Kelly e

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Speaker 1: called the Westpac chief economists with us this morning. That

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Speaker 1: decision by the way drought at two pm. For more

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Speaker 1: from News Talks B listen live on air or online,

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