We expect that the Reserve Bank of New Zealand will follow through on its commitment for further policy easing by cutting interest rates from 2.00% to 1.75% at its policy meeting on Thursday 10th November, particularly if the outcome of Tuesday’s US Presidential election creates turbulence in global financial markets. And while the recent strong domestic activity data mean that the probably of further rate cuts has declined, we still believe that rates may have to fall to 1.5% next year as the issue of low underlying inflation persists.
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