Interest rates tipped to rise again

Wednesday 8 September 2004

Interest rates are heading up tomorrow and probably again in October because the economy is booming and commodity export prices are high, economists say.

By The Landlord

But there is likely to a sharp slowdown next year, they said.

Most bank economists are picking Reserve Bank governor Alan Bollard to lift the official cash rate from 6 per cent to 6.25 per cent tomorrow, and what would be the sixth increase of the year, again in October.

The economy has grown much faster than expected this year, expanding 2.1 per cent in the March quarter, according to Bank of New Zealand economists. That compared with the Reserve Bank June forecast of just over 1 per cent.

That meant the economy was running at near full stretch, increasing the risks for inflation. Unemployment is running at just 4 per cent and retail spending is strong, both signs of a bustling economy.

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