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Speaker 1: Afternoon, the Reserve Bank has cut the official cash rate

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Speaker 1: by twenty five bases points to three point twenty five percent.

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Speaker 1: Inflation still worries them. They're tapping it to rise further

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Speaker 1: before the end of this year, but the economy is

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Speaker 1: clearly stuffed and will be for a while. Cali Echoled

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Speaker 1: is West Pax chief economist. Hi Kelly, Hi, I'm well,

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Speaker 1: thank you. Why did they cut off their expecting inflation

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Speaker 1: to still go up.

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Speaker 2: Well, I think they're anticipating that inflation is going to

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Speaker 2: come back again after we get past this near term

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Speaker 2: bump towards the end of the year. They think that

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Speaker 2: the unemployment rates still above nairou, so that's going to

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Speaker 2: be putting some downward pressure on wage growth. They think

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Speaker 2: we've got a bit of excess capacity in the economy

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Speaker 2: that should bring inflation to heal over time.

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Speaker 1: Should they have looked through it, Then they.

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Speaker 2: Have looked through it, at least to some extent. They're

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Speaker 2: certainly not talking about putting interest rates up. But what

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Speaker 2: it is telling you, though, is that they're not so

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Speaker 2: sure about how much further they need to put interest

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Speaker 2: rates down, so that they're just slowing the pace of

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Speaker 2: easing a bit.

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Speaker 1: Do you think they've done the right thing, given how

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Speaker 1: stuff the economy isn't given the fact that they are

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Speaker 1: still a handbrake on the economy, should they have gone

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Speaker 1: for fifty.

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Speaker 2: I don't think so. I mean, firstly, we have to

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Speaker 2: remember that their mandate has been squarely just put on

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Speaker 2: the inflation outlook, and the inflation outlook is looking a

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Speaker 2: little bit uncomfortable, particularly for the balance of this year.

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Speaker 2: You're basically looking at seeing headline inflation closer to three

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Speaker 2: percent and two percent. I'm not so sure that the

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Speaker 2: Reserve Bank is really a handbreak on the economy right now. Either.

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Speaker 2: Interst Rates are fallen a long way, and you can

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Speaker 2: see some evidence of that occurring through many indicators that

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Speaker 2: are out there. We're not certainly booming by any stretch

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Speaker 2: of the imagination, so it does take a while.

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Speaker 1: Where do you think neutral is then?

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Speaker 2: Oh, I've been arguing that it's probably close to three

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Speaker 2: point seventy five percent, and we've just sort of like

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Speaker 2: dipped through that level now in the last couple of meetings.

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Speaker 1: Okay, Hey, what do you make of the fact that

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Speaker 1: they weren't unanimous?

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Speaker 2: Well, clearly there is some dissension in the ranks. I

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Speaker 2: had expected that we would see signs of increased debate

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Speaker 2: in terms of how the outlook would go, but I

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Speaker 2: didn't think they'd be very much debate about needing to

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Speaker 2: cut rates. Now, the fact that somebody's prepared to put

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Speaker 2: their hand up and say, actually, I just think we

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Speaker 2: should wait here tells you that, you know, there was

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Speaker 2: a bit of more of a wineball call than we

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Speaker 2: were all expecting.

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Speaker 1: Now, tell me, how would you describe the economy right

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Speaker 1: because they've cut their growth forecast even from the last

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Speaker 1: time when they met in February. What do you would

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Speaker 1: you would you say the economy is stuffed or what

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Speaker 1: would you say?

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Speaker 2: Oh? No, I would say the economy is slowly recovering.

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Speaker 2: The Reserve banks revised growth forecasts are more negative in

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Speaker 2: our own. That's one of the reasons why they've still

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Speaker 2: projecting a need for one more cut and possibly another

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Speaker 2: one in the course of the rest of this year.

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Speaker 2: It remains to be seen, though, whether the economy is

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Speaker 2: really going to be as weak as that. I think

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Speaker 2: they're really kind of pricing in the possibility that business

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Speaker 2: might just take a bit of a step back with

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Speaker 2: the global situation looking a bit more uncertain.

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Speaker 1: I'm liking your optimism, Kelly. Thank you for that, Kelly

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Speaker 1: are Cold Chief economist whispac.

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