The fall in CPI inflation to just 0.1% in the fourth quarter of last year, from 0.4% in the third quarter, could prove to be a game-changer for the RBNZ as it leaves the economy uncomfortably close to outright deflation. This may not quite be enough to prompt the RBNZ to cut interest rates at next week’s policy meeting, but it certainly supports our non-consensus view that rates will be cut from 2.5% to 2.0% this year.
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