Although we suspect that the Reserve Bank of New Zealand will want to keep its powder dry for a little longer, there’s a real chance it will surprise the markets and cut interest rates by 0.25% at the policy meeting on Thursday 10th March. If it does leave rates on hold at 2.5% next week, we don’t think it will be long before it reduces them to 2.0%. That would probably stop the recent strengthening in the New Zealand dollar in its tracks and prompt it to weaken from US$0.67 now to around US$0.60.
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