He also emphatically ruled out any scope for rate cuts in the foreseeable future.
"They've been as hawkish as they could be without putting the rate up," ASB Bank chief economist Anthony Byett says.
"They will be seriously considering putting rates up again in June. That will be another close call and I suspect they won't," Byett says.
Bank of New Zealand economist Stephen Toplis, which is currently taking one of the most hawkish views, agrees a further rate hike in June is "firmly on the bank's agenda."
Bollard suggests that softer than expected economic growth in the December quarter may reflect capacity constraints rather than weakening demand and that the lower than expected inflation rate in the March quarter was heavily influenced by temporary factors.
"The bank's actively gone out of its way to downplay the two indicators that made people think the economy was starting to behave itself," Toplis says.
If the bank's interpretation is correct, it has even more reason to be worried about inflation, he says.
Westpac chief economist Brendan O'Donovan, who thinks the Reserve Bank is being overly hawkish, says the last thing the central bank wants is to incite any kind of rally in the one and two year part of the wholesale interest rate markets which could see one and two-year fixed rate mortgage rates drop.
But if slowing economic growth was caused by capacity constraints there would have been a much bigger run down in stocks than has occurred, he says.
"I think they're grasping too heavily to discount every favourable piece of inflation news. They're effectively saying they've got a prediliction for higher rates and they're just looking for confirmation for their June statement," O'Donovan says.
