The Reserve Bank of New Zealand (RBNZ) as expected left its cash rate unchanged at 2.5% overnight and, crucially, retained its commitment to start lifting rates from around the middle of this year. Many in the markets still forecast an earlier move but we believe that the RBNZ will be able to stick to its timetable. The economic recovery is picking up speed, but inflation should remain subdued for a while and the housing market will probably slow down.
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