The ASX's RBA rate tracker ascribed a 95% market expectation of no change at Tuesday's monetary policy meeting - the only other option was a 5% expectation of lowering the cash rate.

Along with the meeting announcement, the RBA will also release a February Statement on Monetary Policy (SOMP), which will give further details into inflation and economic expectations.

With softer than expected inflation figures recently, chances are the RBA could move forward its 2-3% inflation target from end-2025 where it currently stands.

CBA economists said the inflation figures "rubber stamp" a hold, and expect the next moves to be cuts - 75 basis points' worth towards the end of 2024, and another 75 basis points' worth in the first half of 2025.

"The case to leave monetary policy on hold next week is stronger than at any point in the last two years," said Gareth Aird, CBA's head of Australian economics.

Risk of being 'mugged by reality' again

"The RBA has both dialled up and dialled down its inflation fighting rhetoric on several occasions over the past year. The Board likely thought and hoped its tightening cycle was over after it left the cash rate on hold in August last year following the Q2 23 CPI," Mr Aird said.

"But an upside surprise in the Q3 '23 CPI saw the Board resume lifting the cash rate in November.

"We suspect that this experience means the Board will not wish to jettison its hiking bias just yet."

ANZ's calls for the first cut was later than CBA's, for November 2024, but said the inflation battle is not won yet.

"The RBA’s language on the policy stance will likely lag economic developments (and market pricing)," said Adam Boyton, ANZ's head of Australian economics.

"This will reflect the RBA wanting to be very confident that inflation is coming back to the band in a sustainable fashion before changing its rhetoric."

In November 2023, Judo Bank's chief economic adviser Warren Hogan told the Savings Tip Jar Podcast that the RBA risks being "mugged by reality" by not doing enough to stamp out inflation.

A recent advent that could stoke inflation once again is the crisis in the Red Sea and Suez Canal - Houthi rebels attacking cargo ships, US retaliatory strikes, and shipping companies' reluctance to sail through the area.

All this adds to time and costs, and the squeeze on shipping once again could upset the demand-supply equilibrium, stoking inflation further.

"Now when you consider how critical the Red Sea has become to tanker traffic as Russian crude and products has been forced to travel south to Asia due to sanctions and bans, while Middle Eastern crude has been forced to travel north through the Suez Canal and Sumed Pipeline into Europe, you get a reasonable understanding of just how disruptive this geopolitical blockage has become," Westpac rates strategists said.

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