I recently came across an economic analysis from UBS, which mentioned a point that’s well worth paying attention to. Even if the situation in the Middle East eases quickly, inflationary pressure in Australia remains significant, and this could drive the Reserve Bank of Australia to raise interest rates in May and August.

More specifically, the inflation data for the first quarter is expected to exceed 4.8% year-over-year—an already quite substantial figure. From the central bank’s perspective, the likelihood of Australia raising interest rates is indeed increasing. Moreover, this isn’t just a short-term inflation issue; the negative drag on real economic growth may continue to show up over the coming months, or even for longer.

In other words, even if geopolitical risk is reduced, Australia’s economy still faces considerable pressure. High inflation means the Reserve Bank of Australia has very limited room to maneuver, and rate hikes may become an inevitable choice. For anyone tracking Australian assets and related markets, this is indeed a signal that needs close monitoring.