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Growth should start again 'from early 2009'
10:00AM Tuesday August 26, 2008

Investment bank JP Morgan expects the New Zealand economy will start growing again in early 2009, after a series of interest rate cuts by the Reserve Bank.

It has, however, forecast New Zealand inflation will continue to rise to a peak of 5.2 per cent in the fourth quarter, which will restrain the Reserve Bank from making bigger and faster cuts.

The forecast from JP Morgan is based on the expectation that the Reserve Bank of New Zealand (RBNZ) will make three 25 basis point cuts in the official cash rate (OCR) this year, including one each in September, October and December.

This would leave the OCR at 7.25 per cent by the end of the year. JP Morgan forecasts the OCR to be 6.25 per cent by mid 2009, although it acknowledges that this will depend on how the economy responds to RBNZ policy changes.

More here.