Australians could be hit by another interest rate hike as soon as a fortnight from now unless inflation eases.
Minutes from the Reserve Bank's cash rate meeting at the start of the month have revealed the RBA was tossing up between leaving rates on hold and increasing them by a quarter of a per cent.
While the board under new governor Michele Bullock ultimately decided on the former, it did so keeping in mind that quarterly inflation data will be released this month and will play a significant role in November's interest rates decision.
"Members observed that, prior to the November meeting, they would receive additional data on economic activity, inflation and the labour market, as well as a set of revised staff forecasts," the RBA minutes, released today, said.
"In reaching their decision, members noted that some further tightening of policy may be required should inflation prove more persistent than expected.
"The board has a low tolerance for a slower return of inflation to target than currently expected.
"Whether or not a further increase in interest rates is required would, therefore, depend on the incoming data and how these alter the economic outlook and the evolving assessment of risks."
Key among that incoming data are two upcoming releases from the Australian Bureau of Statistics.
A labour force update – including the key measure of the unemployment rate – will be released on Thursday, before quarterly inflation data comes out next Wednesday.
While inflation has decreased significantly since its peak of 8.4 per cent in December, last month's data revealed an unexpected uptick from 4.9 to 5.2 per cent in August.
Much of that was driven by increasing oil prices – something noted by the RBA.
"Rising energy prices had seen headline inflation pick up in a number of countries over the prior couple of months, including in Australia," it said.
"Members discussed the recent increase in oil prices, which were almost 30 per cent higher than at the end of June... refined fuel prices had risen even more."
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Those observations were made before the outbreak of war between Israel and Hamas sparked significant fluctuation in fuel prices.
Analysts at ANZ Research expect oil to hit $US100 a barrel in the short term because of the growing risk of regional escalation.
Neither Israel nor Gaza is a significant oil supplier, but the risk to oil markets will rise if "the conflict broadens", they wrote in a research note on Friday.
