The Reserve Bank (RBNZ) is expected to give an insight into its future direction of interest rates today.
Reserve Bank chief economist Paul Conway will give a keynote speech on changes to the global economy since the COVID-19 pandemic later on Tuesday.
In this speech, Conway will also make brief comments on domestic data developments since the November Monetary Policy Statement – fueling speculation there could be hints about future official cash rate (OCR) decisions.
Infometrics' chief executive and principal economist Brad Olsen joined Newshub Late to discuss what clues we should be looking for to give an indication on whether the RBNZ will change its stance on interest rates.
The RBNZ maintained the Official Cash Rate at 5.50 percent in November and ruled out cuts anytime soon.
Despite saying interest rates were restricting spending and consumer prices were falling, the RBNZ said borrowing costs needed to stay high for some time - and wasn't forecasting rates cuts until the start of 2025.
"The committee is confident that the current level of the OCR is restricting demand. However, ongoing excess demand and inflationary pressures are of concern, given the elevated level of core inflation," the RBNZ said.
However, Olsen said in New Zealand we have seen markets pick a very strong push for interest rate cuts "sooner rather than later".
"Now, of course, it's a long time until the Reserve Bank next formally reviews the official cash rate – that happens at the end of February – but since then we've had lower inflation data, lower GDP data, better employment outcomes," Olsen told host Rebecca Wright.
"Really what we are looking for [today] is whether the Reserve Bank is on board with the markets around cutting interest rates sooner or if it wants to push back against the markets and say 'hold on, you've gone too quick, actually there is still an inflation risk."
Olsen said the speech won't necessarily tell us the RBNZ's next move, rather it will give us an idea of how the central bank's thinking is starting to evolve.
