Escalating tensions in the Strait of Hormuz have deepened the Reserve Bank's inflation dilemma as the central bank board contemplates dropping a third consecutive hike on borrowers.
Financial markets were pricing in about a three-quarter chance that the Reserve Bank would lift the cash rate by 25 basis points on Tuesday, after headline inflation surged to 4.6 per cent in March.
Inflation was already well above target before the Middle East conflict closed the Strait of Hormuz, sending global energy markets into chaos, and surging fuel prices have only amplified the central bank's inflation headache.
Cargo ships and oil infrastructure were reportedly damaged on Monday as hostilities briefly resumed in the vital shipping lane.
The benchmark Brent crude oil price jumped 5.5 per cent to about $US114 a barrel as traders considered the risk to inflation of an even longer disruption to energy supplies, Westpac economist Ryan Wells said.
Prime Minister Anthony Albanese said Australians were under financial pressure from a conflict on the other side of the world in which Australia was not a participant.
"We want to see the conflict end because it is having a massive impact on the global economy," he told reporters in Brisbane.
If the RBA did hike rates again, it would be the government's fault for years of overspending, said Opposition Leader Angus Taylor.
Economists at the Commonwealth Bank, NAB, ANZ, Westpac, AMP, Deutsche Bank, Challenger, JP Morgan, HSBC and Citi all predict Reserve Bank governor Michele Bullock will announce a hike following the bank's meeting at 2.30pm.
That would bring the cash rate back to the peak of 4.35 per cent before the RBA's short-lived cutting cycle in 2025.
For an average borrower with a $600,000 mortgage, the three consecutive hikes since February will....
