The festive season could be soured by another round of interest rate pain if the Reserve Bank board decides more tightening is needed to drive inflation down. 

A 25 basis point hike remains possible in the home stretch into the meeting on Melbourne Cup day, which would take the cash rate to 4.35 per cent. 

After lifting interest rates assertively since May last year, the RBA has been on hold at 4.1 per cent for four months in a row, suggesting the tightening cycle is drawing to a close. 

Markets were implying a 50-50 chance of a hike on Tuesday, yet economics teams at all big four banks were in favour of a 25 basis point increase.

RBA governor Michele Bullock is wary of a slower return to target than the 2025 forecasted timeline for fear inflation expectations becoming unanchored.

The concern is that once households come to expect high levels of inflation into the future, they adjust their behaviour accordingly and this influences actual price movements.

The board will consider an updated set of economic forecasts alongside strong inflation data – particularly underlying measures – and signs of relative resilience in household spending and the labour market. 

Yet some economists have warned further tightening may be unnecessary as the economy is already starting to slow and interest rate hikes take time to work through the economy. 

Australia Institute chief economist Greg Jericho said households were struggling from the 400 basis points of tightening and wage growth falling short of the rising cost of living. 

He said the top contributors to the strong September quarter inflation data were largely essentials and spending more on these goods means less is leftover to spend, helping to lower demand. 

“An interest rate rise is not needed … it will hammer demand that is already weak,” he told AAP on Monday.

The International Monetary Fund has also called on the government to do more to contain inflation so borrowers bear less of the burden of fighting high inflation.

While the organisation called for more monetary tightening, it urged state and federal governments to take pressure off inflation by slowing down the pipeline of public infrastructure projects.

Federal infrastructure minister Catherine King acknowledged the role of the expansive infrastructure pipeline on price pressures and said the government was searching for opportunities to streamline it.