Given the recent slate of weak economic data we now expect the RBNZ to start loosening policy in August, rather than in November as we were previously predicting. For one thing, timely activity data suggest that the New Zealand economy fell back into recession in Q2. For another, this week's soft CPI release makes it all but certain that inflation will return to the Bank's 1-3% target range this quarter. The upshot is that the longer the RBNZ waits to cut rates, the greater the risk it will overtighten.
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