Fresh consumer price numbers are landing at a pivotal point in the Reserve Bank of Australia’s inflation fight, with fears a firm outcome could force its hand on another interest rate hike.

With official monthly inflation moving in the wrong direction for much of the year, focus has intensified on the more comprehensive June quarter number from the Australian Bureau of Statistics on Wednesday.

Economists expect a one per cent quarterly rise, taking the annual rate to 3.8 per cent, up from 3.6 per cent in the 12 months to March.

This is bang in line with the RBA’s own predictions yet forecasters expect the trimmed mean – the central bank’s preferred measure of underlying inflation – to come in a little stronger, at four per cent on an annual basis.

All four big banks are forecasting a trimmed mean number above the central bank’s predictions, but are not of the view it would be high enough to trigger a hike at the next meeting in August.

No more increases in the cash rate remain the base case of economic teams at the banks, though all have pushed out their projected timelines for cuts.

Commonwealth Bank of Australia economist Stephen Wu said June quarter inflation data would “make or break” the case for more tightening and a 1.1 per cent quarterly inflation increase or above would mean an August rate hike “is more likely than not”.

He said solid jobs growth in June was not enough to warrant a rate hike in isolation, especially with the jobless rate ticking higher, but “will not stand in the way of a rate hike if the June quarter consumer price index data comes in too hot”.

And while the central bank remains cognisant the final mile to bring inflation back to its two to three per cent target band will be bumpy, it has not ruled anything in or out on interest rates.

Debate continues over the RBA’s inflation-fighting strategy, with some economists of the view it should have gone harder to contain sticky price pressures while others warn the economy is weak and more tightening would needlessly trigger a recession.

StoneX Group vice president derivatives Everett O’Chee said a hot June quarter inflation readout “may well paint the RBA into a corner and force it to choose between credibility or persistent inflation”.

Mr O’Chee said inflation had been “very sticky”, with monthly trimmed mean data since consistently holding at around four per cent since late last year.

Tax cuts and other state and federal budget stimulus measures were further complicating the inflation task, he added.

“We will look to Wednesday’s CPI data as being one of the most critical data releases in recent history that may test the credibility of our central bank in the lead-up to its August 6 meeting,” he said. 

This post was originally published on Michael West.