Most economists expect the Reserve Bank of Australia to lift its cash rate by 25 basis points to 4.85%, an 18-year high, at its meeting on Tuesday, marking the fifth increase this year as it intensifies efforts to bring inflation under control.
Money market pricing indicates about an 80% chance of a hike. The decision will come alongside updated economic forecasts, and Governor Bullock will hold a press conference an hour after the rate announcement.
AMP economists Diana Mousina and My Bui said inflation remains well above target and has surprised to the upside, with no clear signs of easing. If the RBA does not raise rates, its credibility could suffer and expectations of even higher inflation could become further entrenched.
Australia is caught between two inflationary forces: domestic capacity constraints and the global energy shock. A hike on Tuesday would make the RBA stand out among its peers, as the U.S., European and Japanese central banks have all recently chosen to keep rates on hold, while New Zealand unexpectedly paused its tightening last week.
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