They also think that homegrown inflation will stay sticky. But, they think imported inflation will fall faster.
This has an impact on when interest rates will start coming down.
Interest rate cuts may have to wait
Sticky inflation is a problem for the Reserve Bank. They want to get it between 1-3% (and really, down to 2%) toot sweet.
Our economy isn’t too flash at the moment. The economy has shrunk in 4 out of the last 5 quarters.
However, they may still need to either increase the OCR (or keep it higher for longer) to make sure inflation comes down.
3 months ago, their forecasts implied a 40% chance of another hike in the OCR. Their new forecast implies a 60% chance.
I don’t think it’ll happen. But the Reserve Bank thinks they may need to keep the OCR higher a bit longer to crunch inflation.
A few weeks ago, people were talking about an OCR cut in August. Yesterday’s release makes that less likely to happen.