The decision by the Reserve Bank of New Zealand to lift its official cash rate by 50bp, to 5.25%, came as an upside surprise, but we still think the end of the hiking cycle is approaching. In any case, the Bank’s aggressive tightening confirms our view that New Zealand will enter a prolonged recession this year. As the downturn creates deflationary pressures, we think the Bank will pivot to rate cuts by year-end.
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