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CPI result enables a desirable rates cut

CPI result enables a desirable rates cut

Today's CPI results and the inflation outlook enable an interest rate cut with the prospect of positive impacts for the tradeables sector and exporters in particular, says Business NZ.

Chief Executive Simon Carlaw says the unexpected drop in inflation to 1.5% for the year ending June provides strong evidence of the impact of the high dollar both on big-ticket imports such as fuel and vehicles and on the critical export sector, which is very patchy.

"The economy is showing clear signs of weakness. GDP growth for the June quarter may be struggling to register. Only residual residential construction shows much sign of life and it must be questioned how long that can hold up given a slowing in migration numbers.

"There is therefore a strong case for the Reserve Bank to reduce the cash rate by 50 basis points next week, which would also take some of the steam out of funds flowing into globally high interest rates here," Mr Carlaw said.

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