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Earlier today Westpac noted that "last week's exchange of letters between the Minister of Finance and the Governor of the Reserve Bank was important. As mentioned in our bulletin last week, the exchange of letters caused us to put our OCR forecast under review. If the Minister requires the central bank to avoid unnecessary instability in house prices when setting monetary policy, then the RBNZ is likely to become more cautious about further easing. However, central banks cannot cheat nature. They must deliver the interest rates that the economy requires to balance inflation and employment, sooner or later. The key choice that a central bank makes is how aggressively to move interest rates, and therefore how quickly inflation and employment will return to target. We now expect the RBNZ will choose a slower return to the inflation and employment targets, via more gradual interest rate adjustments. We are forecasting that the RBNZ will reduce the OCR twice next year, and the cuts will begin in May (previously three cuts beginning in April)."