Markets remain optimistic that the RBA will cut its cash rate from 4.1% at present to below 3% by year-end. But with the labour market still tight and activity starting to rebound, we're sticking to our view that the Bank will only cut rates to 3.6% this year. In our view, there's a stronger case to be made for aggressive policy easing in New Zealand, where the output gap is deeply negative and underlying inflation continues to decline. Accordingly, we think the RBNZ will cut rates from 3.5% to 2.5% in the coming months, below what most are anticipating.
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