New Zealand Will Probably Raise Key Rate to 6.25%: BN Survey

Monday 6 September 2004

New Zealand central bank Governor Alan Bollard will probably raise interest rates this week for the fifth time this year to slow the economy as consumer spending fuels inflation.

By The Landlord

Bollard will raise the official cash rate a quarter point to 6.25 percent on Thursday at 9 a.m. in Wellington, according to 12 of 13 economists surveyed by Bloomberg News. The other analyst expects no change. Bollard has increased the benchmark rate from 5 percent at the start of 2004.

Bollard in July said more rate increases were likely because the economy was expanding faster than expected. The jobless rate fell to a 17-year low in the second quarter and retail sales rose at four times the pace economists predicted. Most economists surveyed by Bloomberg News say Bollard will raise rates twice more this year.

``The strengthening economy has built up inflationary pressures that will require some restraint,'' said Sean Comber, economist at Australia & New Zealand Banking Group Ltd. in Wellington. ``One rise will take the rate into neutral. It needs to go higher.''

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