Inflation is forecast to have been right in the middle of the Reserve Bank's 1% to 3% target band at the end of June.
Economists are united in picking inflation to have been 1.9% on June 30, while the Reserve Bank is forecasting 2%. Statistics New Zealand will today release the consumer price index, the official measure of inflation.
Westpac senior economist Dominick Stephens said the CPI data would show that June was the last of three subdued quarters for inflation.
Prices barely budged in the six months from October 2009 to March 2010 as weak demand kept a firm lid on the price of domestically produced goods and services.
The strong exchange rate forestalled increases in imported or import-competing products, he said.
"We expect more of the same occurred in the April to June period."
The improvement in domestic demand had only tickled a few prices here and there.
There was evidence builders were increasing their prices and that rents were rising.
But for the most part, it was too early for the recovery to be driving domestic prices higher, Mr Stephens said.
Westpac was forecasting "fairly routine" seasonal increases or decreases for most non-tradeable components of the CPI, such as a 2.3% increase in household energy prices.
ASB chief economist Nick Tuffley is warning that while inflation in June would be moderate, it was expected to rise well above 5% by the middle of next year as Government policy changes come into effect.
The Government announced at the end of April the immediate implementation of a 10% increase in tobacco excise tax, with further increases planned in the March quarter in 2011 and 2012.
Higher-than-usual increases in ACC levies would provide a larger boost to car registration fees than was typical for a September quarter.
Petrol and energy prices had risen in recent weeks, and retailers had partly attributed those to the implementation of the emissions trading scheme on July 1, he said.
So far, the increase in prices had been less than initially estimated, with petrol prices actually falling in the past week as a result of lower internationally crude oil prices.
The rise in GST from 12.5% to 15% on October 1 was expected to boost overall inflation by around 2%, based on the number of items in the CPI basket to which GST applied.
"The recent surge in pricing intentions indicates businesses intend passing this impact on to customers," Mr Tuffley said.
Given signs of growing capacity pressures, it would be challenging for the Reserve Bank to keep inflation expectations, he said
