An increasing number of economists, among them analysts from Westpac, National Australia Bank, and Deutsche Bank, forecast on Wednesday that Australia’s central bank is likely to raise interest rates next week.

Their forecasts followed an inflation warning issued a day earlier by a senior official.

Financial markets also adjusted their expectations, pricing in a 75% chance that the Reserve Bank of Australia (RBA) will lift rates by 25 basis points to 4.1% next Tuesday. The shift came as conflict in the Middle East drove oil prices higher, intensifying concerns about rising inflation.

In an interview with The Conversation, RBA Deputy Governor Andrew Hauser cautioned that the recent surge in oil prices would increase inflation. He added that the board would likely debate whether to raise interest rates at next week’s meeting.

“The effect of ⁠higher oil prices on headline inflation ⁠is large but temporary,” stated Luci Ellis, ​chief economist at Westpac.

“The RBA Monetary Policy Board will nevertheless ​feel compelled to react, especially given the hit to ‌confidence and financial markets has so far not been severe.”

The RBA raised interest rates to 3.85% last month after inflation picked up again following three cuts the previous year. Headline inflation stood at 3.8% in January, while the trimmed mean measure rose to 3.4%, remaining above the central bank’s 2% to 3% target range, Reuters news agency reports.

Chief economist at Deutsche Bank, Phil O’Donaghoe, had previously believed that the uncertainty linked to the war with Iran meant the likelihood of a March rate increase had faded.

“Our ​read of ⁠Hauser’s remarks is that this conclusion was the wrong one. An amplification of the conflict in coming days could still prompt a pause, but our base case now is for a hike,” he said.