(Updates to add detail from NZIER, comment from senior economist)
New Zealand business confidence rebounded in the second quarter but tepid inflation and heightened global uncertainty may lead the central bank to cut rates at the upcoming August review, a private think tank said on Tuesday.
A net 19 percent of firms surveyed expected general business conditions to improve compared with 2 percent in the previous quarter, the New Zealand Institute of Economic Research's quarterly survey of business opinion (QSBO) showed.
While firms see their profitability improving, inflation remains muted, NZIER Senior Economist Christina Leung said.
"The subdued inflation outlook indicates further scope to cut the official cash rate," she said.
She also noted that heightened uncertainty from Britain's recent decision to leave the European Union "suggests a greater risk" the central bank will opt to cut rates in a bid to buffer the New Zealand economy against any downside risks.
The central bank held rates at 2.25 percent at its June meeting but indicated that further rate cuts were possible.
On a seasonally adjusted basis, a net 18 percent of firms expected general conditions to pick up versus 2 percent that expected conditions to worsen in the previous survey.
The survey's measure of capacity utilisation was 92.9 percent, from the previous quarter's 93.2 percent.
