GDP growth in Q1 was stronger than the RBNZ had forecast and the Bank will have been encouraged by the government’s stimulatory Budget. As such, the RBNZ is likely to take a ‘wait and see’ approach when it leaves rates on hold on at 1.50% on Wednesday 25th June. Ultimately though, we expect that current stimulus will not be enough to bring core inflation back to target. The RBNZ will, therefore, have to lower rates again before the year is out.
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