16 Jul 2015

Cut to interest rate expected

1:25 pm on 16 July 2015

Weaker than expected inflation, compounded by a fall in dairy prices, has economists pretty much certain the Reserve Bank will cut the benchmark interest rate next week.

Official figures show the Consumers Price Index rose 0.4 percent in the three months to June, taking annual inflation to 0.3 percent.

Economists had been expecting inflation to rise 0.6 percent in the quarter, and 0.4 percent for the year, which is well below the Reserve Bank's target of 2 percent.

Westpac's chief economist Dominick Stephens said inflation was still very weak.

"We had a slight uptick in inflation because petrol prices have risen."

"I think the Reserve Bank will be cutting the OCR by 25 basis points next week. There's even a small chance that they could consider going more than 25," he added.

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