Economists split over future of interest rate cuts

Newstalk ZB,
Publish Date
Monday, 22 July 2019, 10:55AM
(Photo / Getty)

Disagreement among economists over just how long the interest rate cuts will last.

The Reserve Bank is expected to cut the Official Cash Rate to another record low before the end of the year.

It's likely to go as low as one-percent in the coming months.

Economist Cameron Bagrie told Mike Hosking there's a lot of pressure on central banks to keep pushing interest rates down.

"You've got the Official Cash Rate at 1.5 per cent, you've got to keep cutting your rates to stop that currency going north."

But Infometrics chief forecaster Gareth Kiernan told Mike Hosking the cuts will only go so far.

"We look at the way the economy is going, and while it's going for a slowdown, it's hardly recession material at this stage."

He says cutting interest rates any lower could be dangerous.

"You do start to run risks in terms of what you're doing with your money, when you do get to interest rates are zero or negative you put the money under the bed and then you've got security issues."

But economist Bagrie says the Reserve Bank also has the currency to consider.

"Welcome to the world where it's race to the bottom in terms of interest rates. You need the cut to follow the other central banks to stop your currency moving up."



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