Economy still too hot for bank

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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