Markets bet 95pc chance of September rate hike after latest RBA comments

RBA deputy governor Andrew Hauser said, "We're probably rather closer now to a more sensible level of long-term global real interest rates than we were a year or two ago."

More economists have joined financial markets in tipping a September rate hike, with the possibility of another in November.

The RBA's Monetary Policy Board will meet on September 28-29 to determine the next move in the cash rate target.

Economists believe that the Reserve Bank's senior officials have decided that interest rates need to be hiked in September, and they expect the RBA's board to rubber stamp an increase in the cash rate to 4.6 per cent.

This view was already developing following public appearances by deputy governor Andrew Hauser on the ABC's 7.30 program last week and the bank's chief economist Sarah Hunter at two conferences over the past fortnight.

"We think tactically November's a better choice but certainly the internal members of the board are making noises that they want to go," former RBA assistant governor and current Westpac chief economist Luci Ellis told ABC News yesterday.

However, an appearance in front of the federal parliament today by RBA governor Michele Bullock, deputy governor Andrew Hauser, and assistant governors Sarah Hunter and Brad Jones has many economists firmly convinced the bank will hike at the end of its next two-day meeting on September 29.

RBC's head of economics and rates strategy Robert Thompson was previously expecting a rate rise in November, but is now forecasting one at the September meeting as well which, if correct, would take the cash rate to a peak of 4.85 per cent — the highest level since before rates plunged in the wake of the 2008 global financial crisis.

"September now seems all but a lock, with November becoming the more contentious decision-point. On the other side of the cycle, we keep a first cut in November 2027," he wrote in a note this afternoon.

Marcel Thieliant from Capital Economics agrees that a September rate hike "now looks like a done deal".

"Monetary policy is already quite restrictive and we think the bank will be wary of causing a sharp rise in the unemployment rate," he argued.

Financial markets are now pricing in a 95 per cent chance of a rate rise in September, according to LSEG data, with a 37 per cent chance of a follow-up hike in November.

The clearest indication that interest rates are likely to move even higher, and potentially stay there, came from RBA deputy governor Andrew Hauser.

He backed a view that had been recently expressed by leading US economist Kenneth Rogoff that the decline in long-term interest rates between the GFC (2007-2009) and COVID-19 (2020) was an anomaly, rather than the norm, and that we're now returning to a more normal period in which long-term interest rates will be higher.