New Zealand - RBNZ to signal rates may fall below 2.0%

When the Reserve Bank of New Zealand meets on Thursday 11^th August, we expect it to cut interest rates from 2.25% to 2.00% and to confirm that it is willing to reduce rates further. A stubbornly high exchange rate, low inflation expectations and subdued wage growth are likely to prompt the Bank to publish in the accompanying Monetary Policy Statement (MPS) a 90-day bill rate that includes at least one additional rate cut below 2.0%. In fact, we expect that the weak inflation outlook will prompt rates to fall to 1.5%, or below, next year.