The RBA is being urged to stay its hand today, in spite of further data showing rising inflation.

The TD-MI Monthly Inflation Gauge has indicated a 0.3% rise in July, bringing the year-on-year figure to 3.2%. The result takes inflation above the Reserve Bank's target band of two to three per cent.

As the RBA board meets today, TD Securities head of Asia-Pacific Research Annette Beacher has urged the Bank to take other variables into account apart from high inflation figures.

"There are considerable offshore headwinds associated with the United States and European sovereign debt issues threatening the global economic recovery. Closer to home, declining credit growth and the cautious consumer confirm that the economy is truly two-speed, overshadowing the ongoing good news of the private sector investment boom," she said.

Beacher argued that these factors should convince the RBA to leave rates on hold today. However, she said such economic instability would not last, and that further rate hikes may be needed in the future.

"As we are of the view that offshore headwinds will abate, we forecast one more rate rise this year to 5%, and we continue to pencil in November as the most appropriate month," she commented.

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