The sharper-than-expected rise in the unemployment rate in the first quarter reversed half of the large decline at the end of last year and suggests that the previous improvement was more a mirage than a miracle. Given that wage growth also remained subdued in the first quarter, today’s figures support our view that the RBNZ will have to cut rates by 0.25% to 2.00% in June and then to 1.75% later this year.
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