Inflation has hit a 21-year high of 5.3%, with fuel, food, travel and power prices pushing the consumers price index up 1% for the June quarter.
The increase was stronger than expected, with most economists forecasting a 0.8% rise.
The result reinforced ASB's expectations the Reserve Bank would raise the Official Cash Rate in December, ASB economist Christina Leung said.
The "upside surprise" mainly came through in tradeable inflation, which increased 1.5%, she said in a statement.
Beyond the expected increase in food and petrol prices, there were signs improved demand was allowing retailers to recoup some operating margins in price of imported household items.
That was particularly evident in price increases in clothing and footwear and household contents during the second quarter.
The 0.6% increase in non-tradeable inflation was in line with the bank's expectations and suggested domestic inflation pressures were contained "for now".
There were some areas of concerns, with construction cost inflation recording a reasonably robust 0.9% increase in the quarter.
Statistics New Zealand noted the increase was concentrated in the South Island, suggesting post-earthquake rebuilding activity was beginning to flow through to a recovery in construction cost inflation.
"We expect construction cost inflation to accelerate over 2012 as rebuilding activity gathers momentum," she said.
Westpac economists said the CPI saw the expected contribution from strong world commodity prices.
What was a surprise was the extent of price increases in other internationally-traded items - household contents rose 1.4% while recreation and culture rose 0.4%.
However, those segments tended to be more volatile and were a frequent source of CPI forecasting errors, so the stronger than expected upturn should not be over-interpreted.
The Reserve Bank was already braced for an annual inflation rate starting with 5, due to a range of policy-imposed cost increases during the past year (GST, tobacco excise, ETS).
However, it was increasingly likely annual inflation would still be above 3% by the end of the year, when most of those charges would have "dropped out of the equation".
The Reserve Bank had made a "crucial assumption" that inflation expectations would ease back to within the 1%-3% target band, something that became less likely when observed inflation remained so high, Westpac said.
ANZ said the stronger than expected CPI increase left the bank in no doubt the 2.5% OCR emergency setting was "on borrowed time".
Act Party leader and former Reserve Bank Governor Dr Don Brash said the high inflation rate was a warning.
Inflation had an especially devastating effect on those on fixed incomes and at lower socio-economic levels.
While the new figure was undoubtedly due in part to last year's GST increase and factors such as weather induced food shortages, it did underscore the need for governments to stop "running up irresponsible deficits", he said.
The transport group rose 2.7% in the June quarter, with higher prices for petrol (up 4%), international air fares (up 6.8%) and domestic air fares (up 8%).
Food prices increased 1.1%, with higher prices for grocery food (up 1.5%) and vegetables (up 6.7%).
Significant individual upward contributions came from seasonally higher prices for tomatoes (up 63.6%) and lettuce (up 30.1%).
The housing and household utilities group rose 0.9%, were prices for electricity up 2.7%, purchase of new housing up 0.9%, and rentals for housing up 0.5%.
