Consumer price numbers out on Wednesday are expected to be the calm before a surge as the further effects of the pandemic on prices come to bear.
Photo: 123RF
The consumers price index is expected to rise about 0.7 percent or 0.8 percent, which would leave the annual inflation at around 1.4 percent.
However, strength in the numbers is likely to be masked, with the March quarter data missing the usual 10 percent tobacco tax rise.
Kiwibank senior economist Jeremy Couchman expected a strong housing market and rising fuel prices would be the main inflation drivers, offset by the smaller increase in the tobacco tax.
"On the housing side of things, there's just the ongoing increase in construction costs with a huge demand for housing at the moment, and also with limited supply of rentals, rents are, they're just gradually increasing," he said.
"On the transport side of things, there was a reasonable lift in petrol prices over the quarter as well."
Couchman said inflation pressures could be expected to push considerably higher, perhaps as much as 2.5 percent in the current quarter.
"That's ongoing price pressures from supply chain issues around the world and issues around our ports, but also there's some base effects so the fact that we went into lockdown in the second quarter last year that led to some softening in prices."
"From the Reserve Bank's point of view, this is likely to be more of a temporary increase as supply chain issues reduce over the year."
The Reserve Bank has already said it regards current cost pressures as largely temporary, which it will discount, and said in the past it would contemplate allowing inflation to rise above its 2 percent target point, without needing to reach for the usual control lever of raising interest rates.
