RBNZ may still cut rates into negative territory

The RBNZ has stabilised the pace of asset purchases in recent months and is on track to meet its QE targets. We think the Bank will not announce any further stimulus measures on Wednesday 12th August. And given the resilience in the labour market, we now think the Bank is unlikely to cut rates to -0.75% as we had previously expected. Even so, we still think inflation will disappoint for years to come which should prompt the Bank to cut rates to -0.25% next year.