With the unrelenting focus on interest rates, mortgages and property prices, it can be easy to forget exactly what Reserve Bank governor Allan Bollard's main task is - keeping inflation under control.
And this coming Wednesday, we will get to see what's happening on that front, when thequarterly CPI figures are released.
ASB treasury economist Daniel Wills said last week's Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research (NZIER) had shown a jump in pricing intentions from New Zealand companies.
"Probably one of the most significant aspects of that [survey] was the pricing intentions, which jumped very sharply.
"Obviously a lot of cost pressure is coming through to businesses and that is starting to impact on the bottom line, which you're starting to see with profitability," says Wills.
"It's all pretty consistent with the [Reserve Bank's] continuing concerns that domestic growth momentum is going to keep the pressure on in terms of resources and spending."
The survey showed 27 per cent of firms increased prices over the past three months and 40 per cent of firms expect to raise their prices, up from 28 per cent three months ago.
Pricing intentions have not been this high since 2000, just before inflation spiked to 4 per cent.
Wills said this week's inflation number is still likely to be well below 3 per cent, but any "upside surprises in terms of market expectations" would add to market uncertainty about whether Bollard will raise the Official Cash Rate (OCR) the following week.
The market says there is a 40 per cent chance of Bollard raising the OCR next week.
But if there is a "large upside" on this Wednesday's CPI number, then this chance of a hike could be raised.
