Doubts and housing point to interest cut

But while most market economists believe Mr Bollard will cut the official cash rate (OCR) by 25 basis points to 5.25 per cent next Thursday - and a couple predict a 50 basis points move - they are divided about how much easing, if any, is in store beyond that.

Of 15 economic forecasters polled this week, eight expect the bank to have cut the OCR again to 5 per cent by the end of September, three say 4.75 per cent, but four expect it to remain at 5.25 per cent.

Westpac chief economist Brendan O'Donovan said: "The Reserve Bank has to weigh the risk of weakness internationally against strong domestic demand when domestic capacity constraints are pressing. That calls for a softly, softly approach."

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