Inflation likely to hit RBA target band

Rising costs for petrol, fruits and vegetables and tobacco are expected to have lifted consumer prices in the March quarter, with headline inflation heading into the Reserve Bank's target band.

The Consumer Price Index for the March quarter will be released on Wednesday and is expected to have risen 0.6 per cent for an annual rate of 2.3 per cent, according to economists.

Underlying inflation, which strips out the effects of volatile price movements, is forecast to have been 0.5 per cent in the quarter and 1.8 per cent over the year.

"While underlying drivers of inflation remain subdued, the March quarter will likely be boosted by a perfect storm of higher electricity, petrol and fresh fruit and vegetable prices," Citi economist Paul Brennan said.

Citi is forecasting a rise in the headline CPI of 0.7 per cent and a 0.5 per cent rise in underlying inflation.

In addition, higher tobacco prices and seasonal increases in health, education and childcare costs would add to to consumer prices.

While soft wages growth and spare capacity in the labour market weigh on core inflation, the headline inflation rate is likely to lift to within the RBA's target band for the first time since the September quarter of 2014, Commonwealth Bank economist Gareth Aird said.

Economists expect the CPI figures to confirm the slowing consumer demand that has been apparent in recent muted retail sales data, indicating that margin pressure has intensified.

That will likely mean rate rises are off the table, according to Mr Aird.