Interest rates unlikely to fall on fuel prices alone

Data showing inflation alive and well over the first quarter is expected to add to the Reserve Bank's resolve in keeping the official cash rate high this year, despite fuel prices being a big part of the problem.

Statistics NZ data showing the consumer price index went to 3.4 per cent in the March year was anticipated and the Reserve Bank is expected to keep its official cash rate at 7.25 per cent when it releases the results of its review on Thursday.

Economists expect the rate to remain unchanged throughout most of this year.

"The interesting thing is we've just had negative growth, the economy shrank in the fourth quarter of last year and it doesn't look like it's going to grow much in the first quarter of this year," said David Plank, head of macro research and strategy for Deutsche Bank in Australia and New Zealand.

"But we've still got the highest cash rate in the developed world," he said.

Deutsche Bank expects higher fuel prices to again feature in the inflation outcome for the second quarter, the annual figure going to 3.7 per cent. But Plank said the central bank will not tighten in response to that alone.

Westpac Institutional Bank said it expects little change to the Reserve Bank's stance from its monetary policy statement in March.

"We expect the RBNZ to retain the phrase: 'We do not expect to be in a position to ease policy this year', citing retail sales, house sales and inflation as areas of concern," said Westpac.