Economists expect to see a modest lift in today's first quarter consumers price index, but the real pressure is expected to kick in over the next quarter, when the full impact of high oil prices and capacity constraints will be felt.
Market expectations are for a 0.8 per cent gain in the index over the March quarter, up from 0.5 per cent in the December quarter, and compared with Reserve Bank's forecast of a 1.0 per cent rise.
A 0.8 per cent increase in the CPI will take the annual number to a still slight 1.5 per cent - well short of the Reserve Bank's target rate of 2 per cent.
The release will be keenly watched in the financial markets, which since the start of the year have been quick to price in inflation.
Westpac senior market strategist Imre Speizer said the financial markets have become more sensitive to signs of inflation emerging.
"A spike in inflation in the first quarter would suggest that the starting point is that much higher," Speizer said.
"It would just add to the bias of the market, which wants to believe that inflation will be sticky and at a lot higher than central banks think," Speizer said.
"Strong inflation data will only strengthen that belief even more," he said.
While the March quarter is expected to show an uptick in inflation, the real test will be in the current June quarter, when the full brunt of higher oil prices, supply chain constrains, and high levels construction activity is expected to be felt.
The Reserve Bank, which is charged with keeping annual inflation within a 1 to 3 per cent range - with a 2 per cent mid-point - left its settings unchanged at this month's review.
Supply chain disruptions, rising import costs, higher oil prices, and a booming housing market are all putting temporary upwards pressure on the prices consumers face, ANZ chief economist Sharon Zollner said.
"But the transitory nature of these drivers mean that the Reserve Bank is unlikely to be swayed from its watch, worry and wait stance," she said in a commentary.
"A large portion of this rise appears to be coming from temporary global supply disruptions and oil price movements on the tradeable side," she said.
Kiwibank chief economist Jarrod Kerr said a return to full employment and stable inflation will take two years to achieve with confidence, "and that's without further shocks".
"Basically, the economy's looking like a Picasso painting. There's a lot going on, and it will take time to decipher the impacts, both good and bad," he said.
Kerr said monetary policy was likely to remain unchanged well into 2022.
Beyond the first quarter, Kiwibank expects the annual headline inflation to overshoot the Reserve Bank's 2 per cent target.
"Consumer prices are set to take off as firms intend to pass-through these rising costs.
Annual figures in the next quarter will be especially strong due to base effects of a weak quarter last year when prices fell.
"It is likely we see inflation spiking to 2.5 per cent year-on-year," Kerr said.
"But the upcoming acceleration in inflation should prove temporary."