The events of the last week reinforced the message thatconditions for the New Zealand economy have softenedsince the start of the year. Yet the news hasn’t been allone-way, and indeed our assessment is that the ‘pulse’ ofthe economy has actually improved on balance in the lastcouple of months. We believe that financial markets are– once again – overestimating how much the ground hasshifted for the Reserve Bank, and are under-pricing the oddsof future interest rate hikes.
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