RBA Faces Inflation Headwinds, Rate Hikes Looming

The Reserve Bank of Australia (RBA) is facing a tougher job in regulating the economy due to rising inflation. The latest monthly data showed that underlying inflation is too hot for the RBA's comfort. This has prompted some analysts, such as Deutsche Bank, to predict that the central bank could increase interest rates as soon as September. UBS and Goldman Sachs also see a rate rise in November.

The inflation data was released just before Australian Securities and Investments Commission (ASIC) chair Sarah Court spoke at a Council for Economic Development lunch in Sydney on Wednesday. The data showed that underlying inflation is at an uncomfortable level for the RBA, which may lead to a rate increase sooner rather than later.