Interest rate gift for Bollard

Monday 27 December 2004

Reserve Bank governor Alan Bollard can keep his finger off the interest rate trigger for now after the economy cooled in the September quarter, but rate cuts may still be six months away.

By The Landlord

The economy grew 0.6 per cent in the September quarter, taking the annual growth rate to 4.6 per cent - reducing the risk of another rate rise early next year economist said.

The Reserve Bank's latest forecasts assumed growth of 1 per cent in the third quarter.

"Santa Claus delivered Alan Bollard the Christmas present he could have asked for - a sub-trend gdp out-turn," BNZ economists said.

The economy grew about 3 per cent in the first half of the year and economists predict it could be closer to 1.2 per cent in the second half.

There would be a dramatic slowdown from near 5 per cent growth this year to about 2 per cent next year, Westpac chief economist Brendan O'Donovan said. He predicted interest rate cuts from June when house price falls are expected to show through. Others, such as Deutsche Bank and Citigroup, said rate cuts may not happen till September.

Economists said Dr Bollard would likely be relieved by the gross domestic product figures but growth was still solid, so another rate rise next year could not be completely ruled out yet.

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