RBNZ to cut further

The RBNZ decides on interest rates next Thursday and a further 25bp rate cut is expected to take the cash rate to 3%. 

"With underlying inflation remaining well below the 2% target and the outlook for growth weaker due to lower export prices, now, an additional two 25bp cut is expected in September and December", says Barclays.

This would reverse all of last year's rate hikes and return the cash rate to its record low of 2.5%. 

"This is an aggressive call given that the exchange rate has started a rapid slide, but it is consistent with the estimates from our rough Taylor rule. The consensus is also for a 25bp rate cut in July and the market is pricing in some risk of a 50bp rate cut", acknowledged Barclays.