Two more interest rate hikes predicted by September

Previously, it had forecast just one more rate increase, but in its latest Quarterly Predictions, it says inflation is now forecast to rise to 2.5 per cent by the March 2005 quarter from 1.6 per cent at present.

A sharp fall in the dollar, higher world commodities prices, higher oil prices, manufacturing production at a 30-year high and modest stimulus from the budget spend-up, will all add to inflationary pressure.

"The more inflationary outlook will prompt the Reserve Bank into lifting interest rates over coming months," said senior economist Doug Steel. "We forecast the Official Cash Rate to lift to 6 per cent by the end of September."

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