If the Reserve Bank happens to increase the Official Cash Rate over the next 12 months, it is expected prices will start to rise for consumers, along with inflation and interest rates.
This is according to Infometrics principal economist Brad Olsen, who spoke to Breakfast this morning.
"Look, we've been seeing pricing pressure starting to go up, we're seeing a huge amount of pressure building in the economy that (New Zealand Institute of Economic Research) NZIER's quarterly survey of business opinion is just painting the final pictures of an economy struggling really to keep up," he said.
It has been predicted the Reserve Bank will start increasing the historically low OCR of 0.25 per cent as early as November.
Olsen said the Reserve Bank had made it clear moving the OCR was the most cost effective option moving forward, with the expectation it could rise by 0.25 per cent over the next 12 months.
He said if this happened, it would probably lead to increasing costs for Kiwis.
This included at the till, through inflation and a raise in interest rates.
"Essentially that cheap money we've seen over the last 18 months won't be as cheap going forward."
He said Infometrics was predicting inflation could rise to three per cent per annum in the middle of the year.
Businesses may then pass those costs on, Olsen said.
He told Breakfast the only question was whether "inflationary pressures" would stick around.
"Essentially we’ve had a period now of very low interest rates that means cheap money and a lot of spending. We are going to see that eventually turnaround."
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