The ANZ Bank said its current view was that there would be a 0.5 per cent rate hike in October, followed by 0.25 per cent in November and December and end at a cash rate of 3.35 per cent which would put mortgage rate above 5 per cent.

“But recent global developments highlight the persistence of inflation and the August NAB business survey shows the strength of inflation pressures in Australia,” the bank’s economics team said today.

The NAB survey showed cost and price pressures were “intense”.

It came as Reserve Bank Governor Philip Lowe said his comments that cash rates would be virtually zero for years may have been a mistake.

What actually occurred was that rates rose this year from just above zero to 2.35 per cent.

The ANZ said the American experience showed that getting inflation under control was more difficult than expected.

“So, the risk is the RBA’s tightening cycle may be longer and higher than we expected.”

The bank said at 3.35 per cent the cash rate would be at a point where it would slow the economy “quite sharply”.

“But it may not be sufficient to bring inflationary pressures down fast enough to avoid the risk that inflation expectations rise in a waay that threatens the medium-term outlook for price stability.

“This could force the RBA to extend the tightening cycle.”

The bank said further rate hikes would probably follow a pause of some months as the central bank assessed the impact of its increases.

It said by the end of this year, interest rates should be putting downward pressure on house prices and a slowdown in household spending should be evident by the end of this year or early 2023.

But labour demand was still exceptionally strong and wages should increase over 2023.

“This is a combination that should keep the RBA alert to the prospect of core inflation remaining too high for too long,” ANZ said.