Revisions of common associative learning models incorporate a within-compound association mechanism in order to explain retrospective cue competition effects (e.g., [Dickinson, A., & Burke, J. (1996). Within-compound associations mediate the retrospective revaluation of causality judgements. "Quarterly Journal of Experimental Psychology, 49B", pp. 60-80.]). These models predict a correlation between memory for compounds (as a measure for the strength of within-compound associations) and retrospective cue competition but not forward cue competition. This was indeed found in a study of [Melchers, K. G., Lachnit, H., & Shanks, D. (2004). Within-compound associations in retrospective revaluation and in direct learning: A challenge for comparator theory. "Quarterly Journal of Experimental Psychology, 57B", pp. 25-54.]. We argue that a higher-order reasoning account of causal learning can also explain the evidence for the role of within-compound associations in cue competition. Moreover, this account predicts that if making inferences during the learning stage is impeded, a correlation between memory for compounds and forward cue competition should be found as well. The results of a new study confirmed this prediction.