Responding to the Reserve Bank's decision to hold its cash rate at 2%, Mr Tuffley said if the dollar remained a concern for low inflation, the alternative was to try cutting rates to generate inflation.
That inflation most likely needed to come from the non-tradeable sector of the economy.
``There is no guarantee a lower OCR will materially weaken the New Zealand dollar.''
Reserve Bank governor Graeme Wheeler said the annual consumer price index (CPI) was expected to weaken in the September quarter, reflecting lower fuel prices and cuts to ACC levies.
Annual inflation was expected to rise from December onwards, reflecting the policy stimulus to date and the strength of the domestic economy.
``Although long-term inflation expectations are well-anchored at 2%, the sustained weakness in headline inflation risks further declines in inflation expectations.''
Annual inflation is currently 0.4%.
House price inflation remained excessive, posing concerns for financial stability, Mr Wheeler said. There were indications that recent measures and tighter credit conditions in recent weeks were having a moderating influence.
ANZ chief economist Cameron Bagrie said the one change of note in Mr Wheeler's statement was a dropped reference to the New Zealand dollar making it difficult for the central bank to hit its inflation objective.
``We are not entirely sure what to make of that. Nothing, because it is implied anyway? Or does it mean a greater degree of resignation on the part of the Reserve Bank it can do little about New Zealand dollar strength?''
The ANZ was leaning towards the first interpretation.
There was confirmation further easing would be required, the strongest hint to a November cut the
market could ask for, Mr Bagrie said.
Labour Party finance spokesman Grant Robertson said Mr Wheeler's decision to hold interest rates put the pressure back on the Government to take action to rein in the housing market.
The United States Federal Reserve left monetary policy unchanged and projected a less aggressive rise of interest rates in coming years.
The Fed strongly signalled it could still lift rates by the end of the year if the labour market improved further. Fed officials cut the number of rate increases they expected this year to one from two, and projected a less aggressive rise in rates next year and in 2018, according to the median projection of forecasts released with its statement.
