Inflation expected to fall below 8 p.c.

Press, 14 May 1987, Page 31

Inflation expected to fall below 8 p.c.

PA Wellington The annual rate of inflation is expected to fall below 8 per cent by March, 1988, according to economists of the Westpac Banking Corporation. The inflation rate for the year ended March, 1987, was 18.3 per cent, but a Westpac economist, Mr Mike Hensen, writing in the bank’s latest quarterly publication “Looking Ahead,” says the quarterly inflation rate during the next two quarters should be 2.5 per cent, or

expect the ’balling rate of inflation and the

reduced level of Government borrowing ... will lead to an easing in interest rates,” Mr Hensen said.

Uncertainty about the outcome of the General Election and the level of borrowing of State-owned enterprises might, however, cause volatility in interest rates. . Demand for credit was strong in the December, 1986, quarter resulting in a 14 per cent increase in private sector credit for the quarter. The bank could not identify any single reason for the growth in lensing, but said the surge was

caused by a variety of factors including companies financing takeover bids to individuals borrowing to buy shares. A risk existed of a contraction in the economy during the rest of this year, said Mr Hensen. “Consumer spending and export activity are not expected to provide much impetus for growth during the next six months.” Recent business surveys showed some retailers were overstocked and were pessimistic about the outlook for sales growth for the rest of the year, Mr Hensen said.