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RBNZ Expected to Hold the Cash Rate in July, Begin Rate Hikes From September, ASB Bank Says

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The Reserve Bank of New Zealand (RBNZ) is expected to hold the official cash rate at 2.25% in the July monetary policy decision, with consecutive 25-basis-point cash rate increases forecast from September and the rate peaking at 3.25% by early 2027, ASB Bank said in a report on Friday.

The recent peace agreement and negotiations between the US and Iran appear to have reduced upside risks to New Zealand's medium-term inflation by lowering the risk of cost shocks moving through into wider price and wage settings. Lower oil prices, if they continue, may lower inflation and reduce the risk of energy prices filtering into inflation over the medium term.

The lender's core view remains that monetary policy settings will need to be normalized and the cash rate raised towards neutral levels around 3.25%.

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