Economists are predicting that the improvement in producer prices could induce the Reserve Bank of Australia to raise interest rates to counter any inflationary pressures.

Data released by the Australian Bureau of Statistics (ABS) showed that producer prices, which represents the prices of goods and services at the factory or farm gate, posted an unexpected unprecedented rise in 15 months in the first quarter of this year.

According to the ABS, the producer price index (PPI) rose by 1.0 percent at the final stage of production in the first quarter but fell by 0.1 percent over the 12 months leading to end March 2010.

The PPI is a key factor in measuring inflation, the Consumer Price Index which is due for release on Wednesday.

Senior National Australia Bank economist David de Garis, said that the central bank might consider the quarterly PPI result in order to combat any inflationary pressure.

He said that the markets are already seeing rises in the prices of oil, domestically produced prices, utilities prices and construction costs. All these add to inflationary pressures, he said.

De Garis said the markets would be watching the CPI data tomorrow because this might give the Reserve Bank a reason to raise interest rates when the board meets next week.

In the March quarter, at the intermediate stage, the PPI rose 1.2 per cent, while at the preliminary stage it rose 1.0 per cent, the ABS said.