Hedge funds are dialling back expectations for steep interest rate increases from the Reserve Bank of New Zealand (RBNZ) as signs of economic weakness continue to emerge across the country’s economy, according to a report by Bloomberg.

Investors had previously positioned for a more aggressive tightening cycle, with markets pricing in as many as five quarter-point rate increases. However, softer economic data and slowing domestic demand have prompted traders to temper those expectations.

The shift in positioning reflects growing concern that elevated borrowing costs and weaker consumer activity could force the RBNZ to adopt a more cautious policy stance in the coming months. Slowing growth momentum has also weighed on New Zealand bond yields and the kiwi dollar.