New Zealand's cash rate to rise sooner than markets expect

The Reserve Bank of New Zealand (RBNZ) yesterday cut its cash rate by 50bp to 2.5% in response to last month’s devastating earthquake in Christchurch. The RBNZ made it clear that it intends to stay in wait-and-see mode for some time. The markets have now priced in the cash rate being unchanged for at least the next 12 months. In contrast, we expect the cash rate to be hiked later this year.

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