Graham says AMP expects inflation to head higher from later this year.
This reflects some downside in the Trade Weighted Index and higher economic growth which will eventually asbsorb spare capacity and put upward pressure on prices.
"That means the Reserve Bank will be tightening from late this year or early next year," he says. "At the very least they will be more hawkish in the commentary by December, signalling a tightening early next year."
He says the central bank should go earlier with OCR increases rather than leave it till later.