The Reserve Bank has kept the official cash rate unchanged at 5.5 percent for the seventh consecutive meeting.
The central bank said the economy has slowed, unemployment has risen and household budgets are under pressure.
“While weaker capacity pressures and an easing labor market are pushing back domestic inflation, this decline is being dampened by sectors of the economy that are less sensitive to interest rates,” the monetary policy committee said in a statement.
“These short-term factors include, for example, higher residential rental prices, insurance costs, municipal rates and other domestic service price inflation. A slow decline in domestic inflation poses a risk to inflation expectations.”
According to the report, annual consumer price inflation remained above the target range of 1 to 3 percent and monetary policy needed to remain restrictive to ensure that inflation returns to target levels within a reasonable time frame.
A series of forecasts accompanying the statement showed the OCR remaining at 5.5 percent through the end of 2025.