Will we see a rate cut from the Reserve Bank this year?
Jul 4, 2024
auto_awesome
KiwiBank economist Sabrina Delgado joins the discussion on the potential rate cut from the Reserve Bank, disagreeing with the forecasted timing. The delay in expected rate cuts is analyzed, with insights on economic growth forecast, rising unemployment rates, and regional labor market risks. The housing market trends in New Zealand are also explored, focusing on factors like house price fluctuations, interest rates, migration impact, and regulatory changes.
Reserve Bank may cut rates in November based on inflation trends.
Housing market awaits rate cuts for growth amidst regulatory concerns.
Deep dives
Reserve Bank's Interest Rate Decision
The Reserve Bank's decision on interest rates is a critical factor in the economy, with discussions centered on whether rate cuts will occur in November or later. Factors impacting this decision include inflation levels and the housing market, with potential implications for economic recovery and stability by 2025.
Inflation and Interest Rates Relationship
The relation between inflation and interest rates plays a significant role in determining Reserve Bank actions. Forecasts suggest a possible interest rate cut in November based on inflation trends falling below 3%, prompting considerations for rate adjustments to support economic growth.
Challenges in the Services Sector and Housing Market
Issues in the services sector, such as sticky inflation, highlight challenges for the Reserve Bank in implementing rate cuts. Additionally, the housing market, impacted by migration and regulatory changes, awaits interest rate cuts for growth, while facing concerns about house price rises and debt-to-income limits.
Bernard Hickey goes hunting for the Reserve Bank’s first rate cut in a discussion with Kiwibank economist Sabrina Delgado. It was supposed to be this year, especially now that the economy appears mired in a multi-dip recession with higher unemployment - but sticky local inflation has held the RBNZ back. Now, however, it is forecasting a rate cut in August 2025 at the earliest. Sabrina explains why she disagrees, why the central bank should be able to cut as early as November, and what that’ll mean for the housing market.