The data, the central bank's quarterly survey of expectations, could not be dismissed lightly, BNZ economist Craig Ebert said.
It included market inflation expectations.
"Sure, the one-year-ahead view on CPI inflation will be inflamed by the October 1 boost to GST.
"However, this should not be a factor in the view on what annual CPI inflation will be in two years' time."
The measure was already on the high side, at 2.8% in the previous survey.
Any further increase should be a reminder to the central bank that its principal role was not to pretend to fine tune near-term GDP (gross domestic product) but to manage inflation and therefore the expectations, he said.
"It should do this by way of interest rate policy.
"Relying on jaw-boning is a dangerous method.
"We know because we've been there, done that."
What particularly concerned Mr Ebert was a speech by Dr Bollard in which he appeared to be softening his stance on inflation.
It looked as though Dr Bollard might have wanted to tell financial markets they were overly negative about the economy and that future rate increases would probably be greater than the bare amount now priced in, he said.
"As it was, he did nothing of the sort. Indeed, the speech fed market predilections by betraying an increasing sense of doubt."
Dr Bollard showed doubt about the recovery, seeing it now as "fragile and vulnerable" when the view of the June Monetary Policy Statement was that growth was becoming more broad-based.
There was doubt about further official cash rate increases, judging from the sub-text, Mr Ebert said.
The speech was essentially a warning to employers and employees to not use the policy-charged increases - principally the October GST increase - as a smokescreen for claiming ongoing price and wage increases.
But the rejoinder to that occurring was that the result would be higher interest rates and a dampening of the economic recovery.
Dr Bollard said he hoped that would not be the case.
Mr Ebert said it sounded as though Dr Bollard did not want to raise rates.
"It is not the job of the Reserve Bank to be `hopeful' about inflation out-turns.
"Rather, it is to prevent inflation from spreading into the economy like algal rock snot.
"An orthodox central bank would have simply said that if there were any signs of the upcoming CPI spikes morphing into a wage-price spiral, it would have to set monetary policy tighter than would otherwise be the case."
Mr Ebert was also worried that the speech sounded like a "policy-official attitude" with an overblown sense of ability to influence economic behaviour by talking.
There were elements of the last tightening cycle creeping in already and some of the wording in the speech demonstrated the politically driven attitude central bank independence was designed to expunge, he said.
The speech was also disconcerting for what it did not mention - such as that during the course of a presumed economic recovery inflation was usually anchored by rising interest rates.
The bank's rhetoric was increasingly depicting there was no hurry to be pre-emptive against the rise in inflation that normally accompanied a recovery, Mr Ebert said.
"Of course the bank could probably be afforded at least some time if inflation was as dead as a doornail and the prospects of it taking off again were remote.
"However, this is not the case, in our view," he said.
The data, the central bank's quarterly survey of expectations, could not be dismissed lightly, BNZ economist Craig Ebert said.
It included market inflation expectations.
"Sure, the one-year-ahead view on CPI inflation will be inflamed by the October 1 boost to GST.
"However, this should not be a factor in the view on what annual CPI inflation will be in two years' time."
The measure was already on the high side, at 2.8% in the previous survey.
Any further increase should be a reminder to the central bank that its principal role was not to pretend to fine tune near-term GDP (gross domestic product) but to manage inflation and therefore the expectations, he said.
"It should do this by way of interest rate policy.
"Relying on jaw-boning is a dangerous method.
"We know because we've been there, done that."
What particularly concerned Mr Ebert was a speech by Dr Bollard in which he appeared to be softening his stance on inflation.
It looked as though Dr Bollard might have wanted to tell financial markets they were overly negative about the economy and that future rate increases would probably be greater than the bare amount now priced in, he said.
"As it was, he did nothing of the sort. Indeed, the speech fed market predilections by betraying an increasing sense of doubt."
Dr Bollard showed doubt about the recovery, seeing it now as "fragile and vulnerable" when the view of the June Monetary Policy Statement was that growth was becoming more broad-based.
There was doubt about further official cash rate increases, judging from the sub-text, Mr Ebert said.
The speech was essentially a warning to employers and employees to not use the policy-charged increases - principally the October GST increase - as a smokescreen for claiming ongoing price and wage increases.
But the rejoinder to that occurring was that the result would be higher interest rates and a dampening of the economic recovery.
Dr Bollard said he hoped that would not be the case.
Mr Ebert said it sounded as though Dr Bollard did not want to raise rates.
"It is not the job of the Reserve Bank to be `hopeful' about inflation out-turns.
"Rather, it is to prevent inflation from spreading into the economy like algal rock snot.
"An orthodox central bank would have simply said that if there were any signs of the upcoming CPI spikes morphing into a wage-price spiral, it would have to set monetary policy tighter than would otherwise be the case."
Mr Ebert was also worried that the speech sounded like a "policy-official attitude" with an overblown sense of ability to influence economic behaviour by talking.
There were elements of the last tightening cycle creeping in already and some of the wording in the speech demonstrated the politically driven attitude central bank independence was designed to expunge, he said.
The speech was also disconcerting for what it did not mention - such as that during the course of a presumed economic recovery inflation was usually anchored by rising interest rates.
The bank's rhetoric was increasingly depicting there was no hurry to be pre-emptive against the rise in inflation that normally accompanied a recovery, Mr Ebert said.
"Of course the bank could probably be afforded at least some time if inflation was as dead as a doornail and the prospects of it taking off again were remote.
"However, this is not the case, in our view," he said.
At a glance:
• Reserve Bank appears to be softening stance on inflation.
• Increasing odds on a pause to OCR rises in September.
• Inflation expectations are high and rising.
