The RBNZ announced an end to its asset purchases at this week’s meeting. And given the Bank’s hawkish tone, along with the strong inflation data in Q2, we now think the Bank will begin lifting interest rates in August. The strength in New Zealand’s inflation adds to the near-term upside risk to our forecasts for goods inflation in Australia. But even if goods inflation eases further as we expect, the tightening labour market will still put pressure on wage growth and services inflation before long which is why we expect the RBA to hike interest rates earlier than it currently anticipates.
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