Economists expect the Reserve Bank to remain dovish at next week's review of the official cash rate, now that inflation has come in slightly below bank forecasts.
Inflation in the first three months of 2012 was 0.5%, slightly lower than the 0.7% quarterly rise and 1.8% annual rise the Reserve Bank had been expecting.
TD Securities economist Annette Beacher believes the inflation environment will be "very benign" for the rest of 2012, remaining below 2%; but she expects the rate to rise in 2013 to as much as 3% - 1% higher than the Reserve Bank's forecast.
She says the cost of building materials and labour costs because of the Christchurch rebuild will push inflation above its average of between 2-2.5%.
Ms Beacher says that because of the soft economy at the moment there is no need to rush to raise interest rates.
She suggests the economy should be allowed to operate this year without the threat of higher interest rates but that the country should prepare for a rise in 2013.
