• This week we focus on a fairly important economic variable: inflation. Friday sees the release of the Q1 CPI, which we expect will register a 0.4% quarterly increase and a 3.1% annual inflation rate.
• Last week’s Quarterly Survey of Business Opinion reinforced the likelihood that the economy will be weaker over 2009 than the RBNZ has been expecting, with businesses intending to cut back on investment expenditure and employment to a greater extent than reported in late 2008. 
• The RBNZ’s sharp economic recovery is predicated on monetary conditions being substantially looser than they are currently.   Financial market developments and the QSBO results suggest to us the RBNZ should cut the OCR by 50bp on April 30.

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