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 20^th. 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%.