RBNZ Set to Lower Cash Rate Again, Philly Fed Index Falls

Reserve Bank of New Zealand Expected to Cut Rate by Half a Percent

The Reserve Bank of New Zealand (RBNZ) is expected to cut its cash rate by at least another 50 basis points (bps) before the end of the year, according to a recent poll.

Reasons for Rate Cut

• High inflation
• Economic slowdown
• Weakening currency

The RBNZ has already cut its cash rate by 50 bps this year and is expected to continue easing monetary policy as it looks to support the economy.

Philly Fed Index Falls

The Federal Reserve Bank of Philadelphia's (Philly Fed) Manufacturing Business Outlook Survey fell to -70.0 in July, well below the expected -60.0.

Reasons for Decline

• Supply chain disruptions
• Rising costs
• Weak demand

The sharp drop in the Philly Fed index suggests that the manufacturing sector is heading for a slowdown.

Additional Economic Data

• US PPI Final Demand MoM: 0.1% (vs. 0.2% expected)
• US July Philly Fed: -70.0 (vs. -60.0 expected)
• US Annual Inflation Rate: 2.9% (vs. 3.0% previous)

Conclusion

The RBNZ's expected cash rate cut and the weak Philly Fed index point to a challenging economic outlook. The slowdown in the manufacturing sector and rising inflation pose significant risks to growth.