A rate hike next week is all but certain, and worse could be to come for millions of Aussies

As economic headwinds continue to hit Australia, the chances of a rate hike being confirmed when the Reserve Bank of Australia meets has grown.

At the start of the month, the market expectations of an interest rate rise next Tuesday stood at 72 per cent - an already unnerving figure, it has now risen to 88 per cent as inflation remains high and the continuing Middle East conflict continues to keep oil and fuel prices high.

According to a leading economist, the key point of debate turns to how much worse the interest rate pain could get for millions of Aussies.

“The more interesting question is not whether the RBA will raise interest rates next week, but whether there will be a quick second interest rate rise before Christmas, as the RBA is receiving some feedback that suggests inflationary expectations are beginning to de-anchor,” CreditorWatch chief economist Ivan Colhoun said

“Could the RBA deliver back-to-back interest rate rises in September and November to ensure that the inflation track finally changes?”

The issue is, despite the RBA bringing up the cash rate three times this year, the amount of money Aussies and the government still remains high.

However, Colhoun suggested part of the blame for high inflation needs to lie with the RBA itself.

“While unwelcome news, [the potential rate hike] must be balanced against the continued failure of the RBA to deliver lower inflation,” he claimed.

He clarified the inflation woes were not entirely the doing of the RBA, but he said it“affects the lives of all Australians.”

“Australian businesses continue to be impacted by a complex set of forces including high costs, elevated fuel prices, the highest interest rates for many years and the AI investment boom,” Colhoun said.

Colhoun’s criticism of the RBA has echoed similar sentiments raised by David Koch earlier this week, who believes governor Michele Bullock  needs to come out and explain why Aussie households would feel the pinch from rising inflation, even though he believes government spending is contributing more to the problem.

“There’s an increasing likelihood a great many Australians are likely to be handed a bill they did not run up,” Koch said.

“A meaningful slice of the inflation your board is trying to contain is not being generated in a shopping centre. It is being set in a cabinet room,” Koch wrote.

Colhoun said the concerning inflation numbers staying well above the RBA’s target range will compel them to take uneven tougher stance than they have already this year.

“The Board’s recent communication that it is less willing to accept any further delay in the return of inflation to target,” he said, suggesting the cash rate could rise by a higher amount than it has on previous occasions this year.

“Might a larger interest rate rise of 40 or 50 basis points be considered in September?”

The RBA will meet on Monday, with the decision regarding the cash rate set to be handed down on Tuesday.