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RBNZ’s easing cycle has further to go

The RBNZ is all but certain to cut rates by 25bp at its meeting ending on August 20th. Although inflation is set to remain in the upper half of the Bank’s 1-3% target band in the near-term, we suspect the Committee will be more concerned about timely data showing a renewed decline in activity and a continued loosening of the labour market. With risks to the outlook clearly tilted to the downside, we’re sticking with our below-consensus terminal rate forecast of 2.5%.

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