While the chance of a September interest rate cut was never particularly high, a stronger than expected rise in GDP in the second quarter all but confirmed that the Reserve Bank of New Zealand will leave interest rates on hold at 2.00% at the policy meeting on Thursday 22nd September. However, the sustained appreciation of the dollar and the risk that this poses to the inflation outlook means there is at least one more rate cut in the pipeline, and perhaps two. We expect the RBNZ to cut rates to 1.75% in November, and probably to 1.50% next year.
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