Netherlands International: New Zealand Fed resolution warns US and UK of risk of more aggressive interest rate cuts

In a note, ING's Chris Turner said Wednesday's policy decision by the Reserve Bank of New Zealand highlighted the risk to the dollar and sterling that interest rates could be cut more aggressively. The Reserve Bank of New Zealand cut rates by 25 basis points, but two policymakers voted for a 50 basis point cut. Inflation is likely to rise in the short term, but should ease next year given spare capacity in the labour market, the Fed said. Turner pointed out that the Federal Reserve and the Bank of England are also facing difficulties and are unsure how to deal with a short-term rise in inflation. He said the Reserve Bank of New Zealand's decision is a reminder that other central banks may also accelerate the pace of interest rate cuts if the labour market weakens significantly.