Jack Tame: Bring on 50 basis points

Heather du Plessis-Allan Drive

I went for a walk along K Road the other night and saw something I hadn't seen in the longest time: A new restaurant.

I didn't even step inside but it felt like a drink of cold water for a parched man in the desert. When was the last time I saw one of those?

It is, of course, a rarity. And hardly a sign that the entire economy is ready to take off. The number of new restaurants in that part of town is still comfortably outnumbered by the number of 'For Lease' signs.

But as the Reserve Bank prepares for tomorrow's call on the OCR, two things give me optimism that they'll be leaning more towards 50 basis points than 25.

The first is if the economists are right, inflation is already back down within the target band or maybe even closer to 2% than we dare to hope.

It occurs to me that migration inflows have really significantly slowed over recent months. That in turn is reducing pressure on rents, which was one of the stickier parts of the inflation picture over the previous few quarters.

The next CPI data is released in a week, so we get the OCR call before we get inflation data. But if that's the case and we are within the target band - and especially if we're closer to 2% then 3% - there's a pretty decent argument the Reserve Bank should be moving quickly to get us somewhere closer to a neutral cash rate.

The second point that gives me a bit of optimism is timing. If this were April, I might feel a bit more meh. But after tomorrow there's only one OCR call before the summer break, and then it's a looong wait until February's next decision. While waiting to see what comes of the U.S. election, the Reserve Bank might rightly be concerned about being left behind by other central banks over the three month break between innings.

The markets say yes to 50 basis points. The banks are saying yes to 50. As someone refixing his mortgage in a month... I say yes, please.

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