By Nasteho Said Australia’s central bank is poised to resume raising interest rates on Tuesday as policymakers lose patience with persistently strong inflation, with debate mounting over whether a follow-up hike will be needed.

The Reserve Bank’s nine-member policy board will increase the cash rate by a quarter-percentage point to 4.6%, the highest level since November 2011, in its decision announced at 2:30 p.m. in Sydney, according to a Bloomberg survey. Traders are also pricing an end to the RBA’s two-meeting pause, against a backdrop of spiraling energy prices across the global economy.

Investors will closely scrutinize both the rate statement and Governor Michele Bullock’s press conference an hour later. They’ll be seeking clues on whether the RBA is prepared to deliver back-to-back hikes in November or prefers to watch and wait through the rest of the year.

Investors will closely scrutinize both the rate statement and Governor Michele Bullock’s press conference an hour later. They’ll be seeking clues on whether the RBA is prepared to deliver back-to-back hikes in November or prefers to watch and wait through the rest of the year.

“The risk sits with the need to tighten monetary policy further beyond September given the inflation backdrop,” said Belinda Allen, head of Australia Economics at Commonwealth Bank of Australia. “But it is not an easy decision to push monetary policy further into restrictive territory.” The RBA’s return to policy tightening can be traced back to surprisingly hawkish minutes of its August meeting. In these, a divided rate-setting board set out three key pieces of data it would home in on ahead of the Sept. 28-29 meeting:

Based on this, two of the three releases headed in the wrong direction. This run of stronger data was accompanied by increasingly hawkish communication from the central bank. Senior officials have repeatedly stressed their low tolerance for persistently strong inflation and willingness to raise rates again if needed.

They also pointed to concerns about inflation expectations returning to the 2-3% target band. Bullock alerted a parliamentary panel to a view starting to “bubble up” from businesses that the RBA wouldn’t get CPI back under 3%. Robert Thompson of RBC Capital Markets said after Bullock’s Sept. 18 testimony that the weight of communication from officials “has left us with little doubt that bank insiders have already made up their minds – a hike in September is the necessary course of action.” RBC expects a follow-up move in November to take the cash rate to 4.85%, the highest level since November 2008.

Robert Thompson of RBC Capital Markets said after Bullock’s Sept. 18 testimony that the weight of communication from officials “has left us with little doubt that bank insiders have already made up their minds – a hike in September is the necessary course of action.” RBC expects a follow-up move in November to take the cash rate to 4.85%, the highest level since November 2008.

The central bank has stood pat at 4.35% since May after opening the year aggressively, with rate rises at each of its first three meetings. Most banks, including CBA and Goldman Sachs Group Inc., expect the board will tighten on Tuesday. ANZ Bank, UBS Group AG and HSBC Holdings Plc. also see back-to-back rate increases.

As a result, Paul Bloxham, HSBC’s chief economist for Australia, is anticipating “a hawkish hike” on Tuesday, and said his forecast of two rate rises will take a toll on the economy. “We expect this to stall growth around the turn of the year, and we see a rising risk of a recession,” he said.

The global backdrop is also increasingly inflationary due to the conflicts in the Middle East and Russia-Ukraine, neither of which appears likely to end soon, and both of which are underpinning a further increase in fuel prices. The artificial intelligence investment boom is also driving prices higher.

Major central banks are responding, with the Federal Reserve, Bank of Japan and the European Central Bank all lifting rates in the past month, while the Bank of England warned it may need to tighten.

The OECD projected that inflation in wealthy nations will linger in 2027, warning central banks including Australia’s to “remain very vigilant” and intervene more than they did during the post-pandemic period. The International Monetary Fund sent a similar warning to the RBA directly this month, urging it to stand ready to hike.

Australia was grappling with accelerating consumer prices even before the US-Israeli attack on Iran sent fuel costs soaring. The nation’s inflation rate is now among the highest in advanced economies.

Yet other forces suggest the RBA might not have to push rates quite as high as some of the more hawkish estimates. Australia’s housing market, which has linkages across the economy, is in a downturn that’s likely to be exacerbated by another hike. Unemployment is also pushing higher, while CBA’s household spending insights suggest a broad-based slowdown after earlier resilience.

“The current uptrend in unemployment shows that rate hikes are working, albeit very slowly,” said AMP Economist My Bui, while adding that this “won’t derail the Reserve Bank from hiking rates further.”