Capital Economics: Reserve Bank of New Zealand is conditionally starting to raise the official overnight cash rate

However, more timely output data show that conditions weakened in the second quarter. Abhijit Surya, Senior Economist for Asia-Pacific, pointed out that BusinessNZ's composite Purchasing Managers' Index declined again in May, indicating a significant slowdown in growth during the second quarter. Meanwhile, the Reserve Bank of New Zealand's Nowcast model indicates that real GDP in the second quarter will fall by 0.2% quarter-on-quarter. "The latest data may not prevent the central bank from beginning the policy normalization process," Capital Economics stated. "However, with almost no reason for comprehensive tightening, interest rates will at best return to a neutral level."