Steve McKnight

4.3%.

The other main difference between back then and now is interest rates were still relatively low.

In fact, they were too low.

The government was spending a lot of money still at that point.

And so there was too much demand in the economy, too much stimulus.

So that combination between higher petrol prices and interest rates that are too low, meaning the economy is too hot, that's what

came together, smack bang, we're at 7.3% inflation.

This time it's different in that the economy is still in a pretty rough space.

So because the economy is relatively weak, this is more what us economists call cost push inflation.

So the cost of things going up, pushing prices higher, as opposed to demand pull inflation, which is when us consumers are all out there spending.

And because of that, businesses start to put their prices up.

Now, one of the other things I really wanted to ask you, though, Andrew, is what is going to happen with interest rates and the OCR if we see inflation go up?

And that's compared to before Iran even got bombed, right?

Yeah.

Which makes sense.

Of course, that's going to go up a bit faster and further.

Yeah, that increase to 3.25% is very slow out to like 2029.

And so we've got more confidence that, hey, we're likely to get back to 3%.

Remember, the last time we did an OCR podcast, we said that the neutral OCR rate was around 3%.

Remember, the neutral rate is just when they're neither trying to speed up or slow down the economy.