The Reserve Bank says there are still plenty of unknowns, after today's Iran ceasefire announcement and resultant oil price drop.

It's held the Official Cash Rate at 2.25 percent, but is forecasting inflation could surge to 4.2 percent this quarter.

Governor Anna Breman says that figure could be much lower if things settle in the Middle East.

But she says if not, fuel costs could rise more, pushing inflation even higher.

"The worst case scenario is that firms that are already squeezed feel like they have to pass these costs onto consumers, and that we see inflation getting embedded into the economy."

LISTEN ABOVE

• Crude prices plunge, stocks surge as US and Iran agree ceasefire
• Reserve Bank holds OCR at 2.25%, warns of economic weakness
• Long haul flights may face cuts if jet fuel price crisis drags on
• Cost of living to rise 50% more than expected this year
• Business confidence dives as war shock and fuel costs hit firms' outlook