Australia’s central bank is poised to raise interest rates for a fifth time this year on Tuesday, intensifying efforts to gain control over inflation that’s among the strongest in the developed world.

Most economists expect the Reserve Bank’s nine-member board will increase the cash rate by a quarter-percentage point to 4.85%, an 18-year high. Money markets are pricing about an 80% chance of a hike when the decision is released at 2:30 p.m. It will be accompanied by updated economic forecasts and followed by Governor Michele Bullock’s press conference an hour later.

“Inflation is well above target, it has surprised higher and there are no clear signs that it’s easing,” AMP Ltd. economists Diana Mousina and My Bui wrote. “If the RBA doesn’t raise rates, then their credibility could take a hit and embed higher inflation expectations further.”Australia is caught between twin inflationary forces of domestic capacity constraints and a global energy shock. A hike tomorrow would make the RBA an outlier among peers after the Federal Reserve, European Central Bank and Bank of Japan all opted to keep borrowing costs unchanged in recent days. Across the Tasman, New Zealand also surprised with a pause last week.

In contrast, the RBA is set to extend the most aggressive tightening campaign in the developed world as officials fret that inflation expectations may be starting to untether.

Bullock in September pointed to an emerging view among businesses that inflation won’t come back below 3%. Her deputy, Andrew Hauser, last month refined that assessment, saying a growing share of firms think 3-3.5% inflation is “a new normal,” a scenario he called “the central bank’s nightmare.”The RBA has a 2-3% inflation target and the current prolonged run above the top of the band threatens to erode the central bank’s hard-won credibility.

Australia is one of the most vulnerable economies to a global fuel shock as the world’s largest seaborne diesel importer, and has been hard hit since the US-Israeli attack on Iran. That compounded existing inflationary pressures from capacity constraints at home, where productivity remains moribund.

“Rising energy prices are crystallizing the upside risks to the RBA’s inflation outlook. The further escalation is likely to push firms to pass higher input costs on to consumers in coming months.”— James McIntyre, economistFor the full note, click here Given the RBA can do little to directly address either source of inflation, it’s having to squeeze households to prevent them adding to price pressures.

While Australia’s central bank has a dual mandate of full employment and price stability, policymakers are increasingly prioritizing inflation.

Bullock signaled last week that the labor market probably needs to loosen further, despite unemployment rising to 4.7% from 4.1% this year. She told a senate panel the labor market “seems a little tighter” than previously judged.

Documents released under a Freedom of Information request to Bloomberg News last month showed RBA models put the so-called NAIRU — the unemployment rate consistent with stable inflation — at around 5%. But officials had chosen to apply judgment and lowered that assumption to 4.6%. Based on last week’s comments, Bullock may be suggesting that 5% is closer to the mark.

“The RBA has made it clear that it is down-weighting the recent easing in the labor market,” said Luci Ellis, chief economist at Westpac Banking Corp. and a former assistant governor at the central bank. “It is also relatively sanguine about the current downturn in the housing market.”Australian property prices demonstrate the clearest impact of the RBA’s rate hikes to date. Home values have tumbled 8.1% across major cities in the past seven months and are on track for their biggest fall in 40 years, according to property consultancy Cotality.

While the RBA doesn’t target house prices, it does closely monitor their movements given the market’s strong linkages to the broader economy.

The combination of the property downturn, rising unemployment and abysmal consumer sentiment are all factors that could potentially stay the RBA’s hand on Tuesday. On top of that, it takes rate adjustments 12-18 months to filter through the economy, suggesting more impact to come from hikes already delivered.

But given the potential inflationary risks of a pause, if the RBA was to surprise on Tuesday it would only be a “hawkish hold” that set up a delayed hike in December, said Stephen Wu, an economist at UBS Group AG.

A no-change scenario remains the minority view, with other economists warning there may be further tightening to come.

“Inflation is accelerating; and the bank has focused on inflation expectations, not just spot inflation outcomes,” Citigroup Inc. economists Faraz Syed and Josh Williamson wrote following last week’s hot CPI data.

“There is a risk that inflation may become embedded in society with rising fuel and food prices,” they said. “The risk to our view is now for a cash rate with a 5% handle.”