Potential interest rate hikes are back on the table thanks to persistent inflationary pressures. On Wednesday, the Australian Bureau of Statistics (ABS) released the latest consumer price index (CPI), revealing that inflation remains stubbornly high Down Under. Headline CPI rose 4% in the year leading up to May, easing slightly from 4.2%, the month before, while trimmed mean inflation — which many economists consider a better indicator of inflationary pressures because it strips out goods with volatile price changes — increased to 3.6%, up from 3.4% in the 12 months to April. But both figures were above the Reserve Bank of Australia's (RBA) target inflation range of 2% to 3% growth, underscoring why policy is likely to stay restrictive for longer. Still there were some tailwinds in the market. Automotive fuel prices fell 11.9% in May, on a monthly basis. That's on top of a 7% decrease in April.

These monthly falls include the impacts of the halving of the fuel excise on 1 April and lower world oil prices in recent weeks, said Rachael McCririck, head of prices statistics at ABS.

Annually, automotive fuel was up 7.7% in the year ending in May, down from 18.6% in April.Meanwhile, housing costs climbed 6.5% for the year, one of the highest annual increases in the print. Annual goods inflation increased 4.2%. The main contributor was electricity, which surged 21.1% as earlier Commonwealth and state rebates ended and household relief measures expired. New dwelling prices rose 5.6% in May, year-over-year.

But even with inflation cooling, it is still above the RBA's target range. The central bank has repeatedly said it will not ease monetary policy until inflation is back within the desired band.

The central left the official cash rate (OCR) on hold at 4.35% during its June meeting. But RBA Governor Michele Bullock said the decision did not "rule out further tightening in monetary policy if that is what is required to get inflation down."

Now, the latest CPI — paired with a relatively low unemployment rate — has markets reassessing if rates have reached their peak, or if they'll continue to rise.

Meanwhile, the major banks remain split. Westpac is anticipating a rate hike at the August meeting, while Commonwealth Bank of Australia (CBA) and ANZ expect an extended hold.

National Australia Bank (NAB) also expects a hold at the upcoming meeting, but is forecasting the RBA's next move will likely be a decrease, although the timing remains unclear.