Knox, who has also tipped a new oil crisis next year, said the Reserve Bank would be forced to follow the US Federal Reserve and lift the cash rate three more times to 4.85 per cent.

There was also unlikely to be any early reprieve for mortgage holders with the rates likely to stay high until late next year.

This is at odds with the views of the economists at the major banks which have tipped a possible rate hike before Christmas and then cuts starting early or mid next year.

In a note to investors, Knox said he believed the RBA would encounter the same problem in the Australian economy that the Fed is encountering in the US economy.

“Even though goods inflation is falling, wage inflation is beginning and will continue to rise,” he said.

“This means that falling inflation in goods will collide on the way down with services inflation coming up.

“The result in the US economy seems to be that core inflation first declines and then gets stuck at around 5 per cent.

“We think it’s likely that Australia is going to encounter the same problem after a short lag to the US. Hence, we believe that further increases in the Australian cash rate will be necessary. We hold to our target that the Australian cash rate will continue to rise to a final level of 4.85 per cent.”

However, in the investor note, Morgan’s also said there was uncertainty about the resilience of household spending and that there was a possibility it could slow more sharply than implied by current forecasts.

“Higher interest rates could also be expected to encourage households to save more, which would affect consumption,” the note said.

“Given Australia’s economic sensitivity to falling commodity prices, investors must tread carefully over the next 3-6 months. As tailwinds from commodity prices fade, we think above-average earnings growth for the market will be harder to come by.”