Economy still too hot for bank

Sunday 26 September 2004

The economy slowed in the June quarter from a breakneck pace in the March quarter, but economists said the growth was still robust enough to force the Reserve Bank to raise interest rates at least once more this year.

By The Landlord

Gross domestic product grew 0.9 per cent in the second quarter, down from 2.1 per cent in the first and in line with 0.9 per cent in the last quarter of 2003.

Economists said five interest rate increases this year had taken some of the heat out of the economy, but the construction sector was still rollicking along and a tight labour market was creating inflationary pressure.

"It does not avert the need for further monetary tightening," ASB Bank economist Anthony Byett said. "Domestic demand is very strong and showing only slight signs of abating."

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