The New Zealand central bank’s aggressive hiking of the cash rate likely pushed the country into a technical recession in the first quarter, a Reuters poll found, giving traction to the idea the cash rate may have peaked. | Reuters
Yet a handful of economists think the boost to the economy from historically high migration and the return of tourism might force the central bank to do more. The markets still give a 50-percent chance that there will be a further 25 basis point hike by October.
“Most forecasters, ourselves included and RBNZ and Treasury up until the budget, were all forecasting a recession to start about now. The fact that it started nine months ago, just shows us that we’re on a much weaker footing than what we thought,” said Kiwibank chief economist Jarrod Kerr.The economy in the first quarter was hurt by Cyclone Gabrielle and the Auckland flash floods, which caused as much as NZ$14 billion in damage.
However, the data has been volatile of late and a number of economists expect growth to be weak or flat rather than negative.“Whether or not it’s weak but weakly positive or weak but weakly negative it is still weak and in terms of the momentum of the economy that’ll be what’s important for the Reserve Bank,” said principal economist at Infometrics Brad Olsen.Subscribe to our daily newsletter
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