With inflation rising again, the majority of market economists and bond traders are predicting the Reserve Bank will leave the cash rate on hold at 3.6 per cent when the monetary policy board leaves its lock-up on Tuesday.
A surprise surge in inflation last week meant the RBA would "definitely" leave rates on hold, Chartered Accountants chief economist Richard Holden said.
Underlying or trimmed mean inflation, which is the Reserve Bank's preferred measure, jumped one per cent in the September quarter, which was materially higher than the bank's forecasts, governor Michele Bullock said.
After cutting rates as soon as underlying inflation returned to its two to three per cent target band, the RBA's move now looked premature, Professor Holden said.
"I think they're in a bind and the Australian economy is in a bind," he told AAP.
"Unemployment is ticking up, but inflation is (also) ticking up, and if there was to be another increase in inflation ... then they might have to start raising rates, which would really signal that they just misread the play terribly."
With little chance the RBA takes financial markets massively off guard by cutting or hiking rates, the main source of interest from analysts will be the tone of Ms Bullock's post-meeting media conference and the bank's updated Statement on Monetary Policy.
The quarterly statement provides an update of RBA staff projections for key economic data.
Economic growth, unemployment and especially inflation forecasts will be closely scrutinised as major revisions are likely to provide some more clarity on when, or if, borrowers might expect another cut.
Ms Bullock is likely to indicate an ongoing concern over growth in unit labour costs, a key indicator of inflation that has been elevated by Australia's sluggish productivity growth.
After the initial spike in inflation, which was mainly driven by overseas factors, the recent uptick in inflation appears more domestically driven and harder to abate.Â
"This looks like homegrown stuff, particularly in the services sector, which I think is reflecting lousy productivity outcomes and still reasonably robust wages increases," Prof Holden said.
