New Zealand is in the midst of a period of modest deflation. But it’s not born of weak domestic demand, rather our ability to import the impact of excess capacity elsewhere. As local activity remains robust and house prices push ever higher there is no room for the RBNZ to lower its cash rate. However, given that inflation will stay well below the RBNZ’s target for some time, we have decided to postpone our expected rate hike resumption to March 2016. We also concede that we have little conviction at this stage as to the exact starting time or extent of future rate hikes. Indeed there may yet be none.
Read the full report: Economic Research