The RBA's decision to lift rates by 25bp earlier this week does not mark a full-fledged resumption of its hiking cycle. Rather, we believe the Bank was simply taking out additional insurance to make sure that inflation returns to its 2-3% target over the medium term. Elsewhere, in New Zealand, survey data published this week showed that firms’ inflation expectations have continued to trend down, while activity data suggest that the economic downturn has further to run. All in all, the numbers reinforce our view that the RBNZ's job is done.
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