Businesses and households expect subdued inflation
Business expect inflation in two years time will be 2.32%, down from 2.41% three months ago, while economic growth is also expected to be lower than previously thought, according to the Reserve Bank's latest survey.
"Inflation expectations at the two-year ahead level are at a three-year low," says Darren Gibbs, an economist at Deutsche Bank.
Gibbs adds that households' inflation expectations one-year ahead at 3% are also at their lowest level since 1999. "Maybe households are finally convinced low inflation is here to stay," he says.
The central bank is also likely to find comfort in that households expectations of house price inflation in a year's time are also at 3% and unchanged from the May survey.
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