(Bloomberg) -- New Zealand businesses are seeing less pressure on costs and therefore aren’t as desperate to raise prices, adding to signs of slowing inflation, according to an ANZ Bank survey.

The net proportion of companies expecting to raise prices in the next three months fell to 35.6% in June from 41.6% in May, ANZ said in its monthly Business Outlook published Thursday in Wellington. Expectations of inflation in 12 month’s time fell to 3.46% from 3.59%, the report showed.

New Zealand’s economy has lost momentum as the Reserve Bank keeps interest rates high to bring inflation back into its 1-3% target band. Business confidence as measured by the survey fell to a nine-month low in June, adding to signs that growth remained tepid through the second quarter. 

“The medicine is working,” ANZ said in the report. “The economy is clearly weak, as the RBNZ intended, but more than that we are finally seeing renewed meaningful progress on bringing inflation pressures down.”

Firms’ estimated prices will be 1.2% higher in three month’s time, today’s report showed. That’s down from expectations of a 1.8% gain in the previous survey.

Expectations of future wage increases dropped to 2.6%, adding to signs that cost pressures on businesses are easing.

While the nation exited recession with 0.2% growth in the first quarter, all five local bank economists surveyed by Bloomberg predict the economy will shrink again in the three months through June. The outlook for annual average growth in 2024 is just 0.2% — the worst since the Global Financial Crisis 15 years ago, barring the pandemic-induced slump in 2020.

Despite the weak economy, the RBNZ has signaled it will keep the Official Cash Rate at 5.5% until the second half of 2025 because domestic inflation is sticky. While headline inflation has slowed to 4%, non-tradables prices rose 5.8% in the year through March.

Still, investors are betting that rate cuts will start in November this year, and most local economists predict easing will begin in early 2025.

“There is still a long way to go, but we are optimistic that the RBNZ will be in a position to cut the OCR considerably earlier than August next year, as they currently expect,” ANZ said today. It expects a rate cut in February.

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