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RBNZ may hike rates by 50 basis points in two weeks

The tightening in the labour market back to pre-virus levels in Q2 is further evidence that the New Zealand economy is now overheating. As such, the financial markets are right in anticipating a rate hike at the Bank’s August meeting. However, given the Bank’s concern about the housing market and Adrian Orr’s history of springing a surprise we now think the RBNZ will start its tightening cycle by lifting rates by 50 basis points rather than the 25bp that’s currently priced in.

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