New Zealand still on track to lift rates in early 2011

The Reserve Bank of New Zealand (RBNZ), to no-one’s surprise, today kept policy rates unchanged at 3.0%. In coming months, we expect that the activity data will surprise on the upside while the RBNZ will likely become more concerned about inflation. Accordingly, we forecast that the cash rate will move up sooner, and will eventually peak at a higher level, than the markets currently anticipate.

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