While the Reserve Bank (RBA) is due to announce its latest interest rate decision today, economists agree that holding interest rates is a near-certain outcome, with the central bank expected to maintain its hawkish tone in response to the latest economic data.

But while most predict the RBA will soon begin a cycle of cuts – although no consensus has been reached on timing – Judo Bank’s chief economic adviser, Warren Hogan, believes the central bank could have two more hikes under its belt.

Speaking to InvestorDaily, Hogan forecast an increase of 25 basis points in November and an additional 15 basis points in December, potentially bringing rates to 4.75 percent as 2025 approaches.

While he was unsure of his forecast, Hogan said: "I think it's still more likely than not that the RBA will have to raise rates."

"I'm more than happy to withdraw that forecast if I can see progress on inflation," he said.

As a macroeconomist, Hogan believes evidence is "starting to pile up" that the RBA's efforts to curb inflation are not having the desired results. Among that evidence, he said, are rising house prices, still "booming" employment and steady demand for credit.

The point, he said, was that Australia's macroeconomic policy had deviated sharply from global trends, which have traditionally been characterized by synchronized movements.

“You become more likely to try a different strategy [to the rest of the world] it's not working — maybe we should have raised our cash rate above 5 percent last year, now we would be thinking about cutting interest rates,” Hogan said, adding that interest rates are not the biggest threat, but persistently stubborn inflation.

He believes Australia still has a chance of a soft landing, but that depends on preventing a resurgence of inflation.

"Higher rates are needed to get us on the right track," Hogan said.

"This is our best chance of staying out of recession," he said, adding that Australia would enter a certain recession if inflation rose again and forced the RBA to implement a series of rate hikes in 2025.

Reflecting on Australia's recent GDP print showing an economy supported by public spending with a recession in the public sector, Hogan said the data illustrated how "the government is crowding out the private sector".

"We see this on the ground every day," he said. "The government is crowding out the private sector. If the government wasn't doing this, I'd say private sector activity would be higher.

"Of course, private sector activity, especially investment, will expand the capacity of the economy in the future. So it's a double whammy – not only is government crowding out private activity now, it's actually compromising our future activity.

Hogan believes that the central bank, despite external pressure, understands the seriousness of the situation and is ready to act independently to protect the economy.

"It's an extremely complex macroeconomic situation, it's not something we've seen for 50 or 60 years, and so economists are struggling to understand it," he said.

“The RBA understands that, that's why they sound so hawkish, as people would say, because they have their finger on the trigger to raise rates. The broader commentary, the government and other stakeholders who don't want rates to rise, are making it difficult for them.

"But my view is that they are independent and, of course, they have experience that others don't have, and in the end they will do the right thing." Because they know that if they don't, they're going to jeopardize our future, and I don't think they're ready to do that.

The RBA has so far signaled that there will be no interest rate cuts this year. Despite the forward guidance, however, some of Australia's biggest banks, including the Commonwealth Bank, are still forecasting cuts until the end of 2024.

Commenting on this, Hogan said he had "no idea" why some of the country's most respected banks were not heeding the RBA's words.

"I've been a chief economist at a major bank and I've been doing that in this country for 30 years, and I have no idea why the biggest and most respected and well-run bank in the country has economists calling for interest rate cuts with inflation well above target, unemployment is at a 50-year low ... I really don't understand why that is," he said.

"Big bank profits are 1.5 percent of GDP... There is no desperation in our banking system, so why do they think we need a rate cut?"

Ultimately, Hogan believes that taking rates higher will lead to a "better global economy next year" than would otherwise be possible.

The RBA is scheduled to make its September interest rate call at 2.30pm today, with two meetings remaining in 2024.