Pressure grew on Australia’s central bank on Wednesday to raise interest rates despite the turmoil in global stock markets and fears of a US recession after new data showed core inflation surged to a 16-year high in the final quarter of 2007.

The 1.1 per cent rise in the December quarter lifted the 2007 inflation rate to an unexpected high of 3.6 per cent, well outside the Reserve Bank of Australia’s 2-3 per cent target band.