In light of the RBA's dovish messaging at its meeting this week, we have revised down our terminal rate forecast from 3.60% to 3.35%. However, we doubt that the Bank will cut rates all the way to 3.10%, as markets are anticipating. That's especially the case, given that timely data suggest that underlying inflation won't fall quite as quickly as the Bank is predicting. Elsewhere, the New Zealand government's 2025/26 Budget is unlikely to provide much of a boost to growth in the coming quarters, meaning that the RBNZ will have to do the heavy lifting in terms of supporting the economic recovery.
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