New Zealand's central bank is seen leaving interest rates unchanged at a record 8.25 percent next week, but the decision will be a close call given a need to cope with a rapidly-slowing economy and rampant inflation, a Reuters poll shows.
A slew of data since the Reserve Bank of New Zealand's (RBNZ) review in June has pointed to a sharper-than-expected downturn in economic activity and has convinced many that the country is in recession for the first time in a decade. But analysts say the central bank will be cautious about rushing to cut rates given inflation jumped to a two-year high of 4 percent in the second quarter and is set to move further above its target range.
A cut would also send the New Zealand dollar skidding, they said. "With inflation likely to spike at 5 percent, well above the 1-3 percent band, there is a strong case to be made for a cautious approach to cutting rates," said Nick Tuffley, chief economist at ASB Bank.
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