Westpac Weekly Commentary says the CPI to be released tomorrow will be critical as markets agonise over whether the Reserve Bank will stick to its plan of raising interest rates from around the middle of the year - and whether that means June or July.
The consensus from most economists at the moment is for a June hike.
In the March Monetary Policy Statement, the Reserve Bank forecast the CPI to increase 0.3% quarter on quarter*,* but none of the economists agree as there have been price increases since then.
BNZ Markets Outlook says the biggest contributions to the March quarter outturn will come from rising fuel and food costs.
ASB and ANZ are therefore expecting a 0.5% increase, BNZ and JP Morgan are expecting an increase of 0.6% and Westpac is predicting a 0.7% increase.
ANZ Market Focus says given volatility in recent quarterly readings and evidence of the patchiness of the recovery, a strong CPI result may not be enough to cement in a June hike by the Reserve Bank.
"We do not doubt that the inflation trajectory will be increasing as the recovery gathers pace."
JP Morgan Weekly Prospects expects that the annual CPI will print above the mid-point of the Reserve Bank's 1% to 3% over-year-ago (oya) target range.
"It's an uncomfortably high starting point with the economic recovery currently under way likely to gather momentum throughout the year."
ASB Business Weekly says the inflation outlook should be starting to cause a little more concern within the Reserve Bank.
"However those concerns also need to be balanced against uncertainties such as the recent loss of momentum in the housing sector and the impact on the agricultural sector of dry conditions."
