With the economy operating at capacity and with higher energy prices, pressures on consumer prices are somewhat stronger than they were at the time of the July Monetary Policy Report Update.
Assuming energy prices evolve in line with currently prevailing futures prices, CPI inflation is projected to average near 3 per cent through the middle of 2006, before returning to the 2 per cent target in the second half of next year. Core inflation should remain below 2 per cent in coming months, returning to 2 per cent by mid-2006.