As surging energy prices further underscore upside risks to inflation, economists indicate the Reserve Bank of Australia (RBA) will raise its key interest rate next week and warn of a potential additional hike in November. Money markets currently price in roughly a 90% probability that the RBA will lift the cash rate by 25 basis points to 4.6% at next week's meeting. If delivered, this would mark the central bank's fourth rate increase this year.

James McIntyre, an economist who previously expected the RBA to hold rates steady for the rest of 2026, noted in a research report: "The repeated hawkish signals suggest the RBA's already limited patience is nearly exhausted. Further escalation in energy prices could prompt businesses to pass higher input costs onto consumers." McIntyre is not the only market watcher to recently shift expectations on the RBA's rate path. ANZ Bank now forecasts another hike in September while maintaining its outlook for a November increase. UBS, meanwhile, has adjusted its base case to back-to-back hikes in September and November. Both institutions project the key rate will climb to 4.85%, the highest level since 2008. Commonwealth Bank of Australia has moved its expected hike forward from November to next week, citing Brent crude oil prices holding above $100 per barrel.

The RBA was among the early movers in tightening monetary policy among advanced economies, raising rates at each of its first three meetings this year to curb resurgent inflationary pressures. In recent weeks, with energy prices soaring and little prospect of a swift end to the Middle East conflict, the Federal Reserve, Bank of Japan, and European Central Bank have all lifted borrowing costs. The RBA's nine-member board is scheduled to convene on September 28-29. RBA Governor Michele Bullock stated on Friday that some of the upside inflation risks the bank had highlighted "appear to be materializing." She is set to participate in a fireside chat at 1 PM Sydney time, where she is widely expected to deliver a hawkish message.

Australian fuel prices are on the rise. McIntyre pointed out that Australia has one of the highest per-capita diesel consumption rates globally, and freight companies will pass higher diesel costs onto businesses through fuel surcharges. Diesel prices have already climbed substantially this year as geopolitical tensions tighten global fuel supply. Additionally, RBA Assistant Governor Sarah Hunter earlier on Tuesday outlined some of the challenges facing the board in a podcast. Hunter remarked: "The Middle East conflict and its impact on oil prices—if you've filled up your car recently, you've likely noticed it." "The board has been very clear that, even without raising rates, they remain deeply concerned about inflation. We believe the risks to inflation are clearly tilted to the upside."