Food price inflation slows down
The lift in inflation was largely due to temporary gains from higher oil and food prices and a tax hike on alcohol and tobacco, along with ongoing rising costs from a boom in housing construction.
"We expect food prices will remain elevated over coming months due to poor weather affecting crops", Tuffley said.
The annual rise in tobacco duties also boosted inflation.
New Zealand's dollar strengthened after the country's headline inflation rate accelerated to the fastest pace in five years in the first quarter and beat forecasts.
BTMU FX Strategy Research notes that the NZD has derived support overnight from the release of the stronger than expected inflation report from New Zealand which revealed that underlying inflation pressures are picking up more quickly than the RBNZ had anticipated.
The CPI rose 1 percent in the March 2017 quarter from the December 2016 quarter, when it rose by 0.4 percent. The RBNZ had not expected inflation to reach 2% until next year.
For example, bacon has increased in price nearly 32 percent over the past 10 years, while ice cream went up 21 percent over the same time period.
Alcoholic beverages and tobacco prices rose 4 percent on quarter in the March quarter, influenced by a 9.7 percent increase in cigarette and tobacco prices. The average price of 25 cigarettes was $31.60 in March versus $28.82 in December previous year, StatsNZ said.
Cheap oil in recent years and the tepid inflation environment has made life hard for New Zealand's Reserve Bank, which delayed cutting interest rates too aggressively for fear of stoking demand for an already hot property market.
The recent sharp recovery in inflation will come as a relief to New Zealand's central bank.
Today's data showed that housing-related prices continued to increase, up 0.
The bureau's Consumer Expenditure measures all the different goods and services consumers purchase in a year, and passes these numbers to the CPI to form a "market basket" -a list of everything people buy and what percentage of their total spending goes to each item.
"News today that inflation has exceeded 2.2 per cent means that interest rates in New Zealand are set to rise, hitting young home buyers", says Mr Seymour.
- Annual inflation in March 2.2%, quarterly inflation 1%.
Inflation in the quarter rose 1%, ahead of the Reserve Bank's forecast of 0.4% and the market expectations of 0.8%. Non-tradeables inflation, which focuses on domestic inflation, rose 1 per cent on the quarter and was up 2.5 per cent on the year.