Rates to peak soon says bank

Tuesday 28 September 2004

Economic growth has almost certainly peaked and interest rates may do the same soon, says Deutsche Bank.

By The Landlord

But the peak in rates may prove to be a plateau, such is the strength of domestic inflation.

The economy grew 0.9 per cent on the June quarter, to be 5.7 per cent larger than in June last year.

But Deutsche Bank's fixed income strategist David Plank says that unless it grows 1.7 per cent or more in the current quarter - which seems unlikely - that is likely to be the peak of the annual growth cycle.

Since the Reserve Bank introduced the official cash rate five years ago turning points in the growth cycle have been followed by turning points in interest rates with a much shorter lag than in the 1990s.

"You can probably say that rates are pretty close to their peak, but it is hard to argue they are going to come down any time soon," Plank said.

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