Our Australia and New Zealand Chart Pack has been updated with the latest data and our analysis of recent developments.
Central banks in both Australia and New Zealand are likely to remain in “wait and watch” mode in the near term, given lingering risks to the inflation outlook. However, we think concerns about inflation persistence are overdone. Goods inflation is already in freefall in both countries and services inflation should soon follow suit. Moreover, with economic activity remaining subdued and unemployment rising, we suspect that rate cuts will be on the table before long. We expect both the RBA and the RBNZ to change course and loosen policy settings from Q3. Once the Antipodean central banks start cutting rates, they are likely to do so more aggressively than markets are pricing in.
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