Rising inflation is likely to force the RBA
's hand on rates, though it is unlikely to move today.
The TD Securities - Melbourne Institute Monthly Inflation Gauge has risen by 0.5% in May, following on a 0.4% rise in April. In the 12 months to May, the Inflation Gauge has risen by 2.9%, putting inflation toward the top of the Reserve Bank's 2-3% target band.
TD Securities head of Asia-Pacific research Annette Beacher said the consecutive rises in the gauge show that inflationary pressures remain "sticky".
Beacher said TD Securities has pushed back its prediction for a rate hike, but that the market should expect a tightening cycle eventually as inflation remains a concern.
"While we may have pushed out the beginning of our expected tightening cycle from November to March 2015, upside to price and activity data speaks to us that the market remains too complacent by not pricing any rate rises over the next twelve months,” Beacher said.