By Devayani Sathyan

BENGALURU The Reserve Bank of Australia will hike interest rates once more by a quarter percentage point on Tuesday and pause for the rest of the year as inflation is still running well above the target, according to a slim majority of economists in a Reuters poll.

Although the RBA has raised rates by a total of 400 basis points since May 2022, inflation was still running at 6.0% in the last quarter, double the upper end of the 2-3% target range.

A record low unemployment rate and a rebound in house prices in Australia - one of the world's most expensive housing markets - suggests the RBA still needs to raise base borrowing costs.

Most global central banks are inching closer to the end of an historic tightening campaign, including the U.S. Federal Reserve, and economists also expect the RBA will be done soon.

Over 55% of economists in a July 26-28 poll, 20 of 36, forecast the RBA to raise its official cash rate by 25 basis points to 4.35%, the highest in nearly 12 years, at its Aug. 1 meeting. The remaining 16 expected no change.

But financial markets were pricing in only a one in five chance of that happening.

"We're still expecting a hike," said Jameson Coombs, an economist at Westpac.

"However, the risk of a pause has definitely increased, potentially after (the) inflation report, but it's again going to be another quite finely balanced decision," said Coombs, referring to the fall in quarterly inflation data on July 26.

"It's not clear evidence yet that we're seeing a turn in the trajectory of inflation, but it is a potential early indicator that some of the impacts of rate hikes on demand are starting," he said.

If realised, this would be the final rate hike from the RBA under governor Philip Lowe. Deputy governor Michele Bullock was appointed in July as the next RBA chief and will take up her role in September.

Among major local banks, CBA and Westpac expected a 25 basis points hike next week, while ANZ and NAB predicted a pause.

A strong majority of economists, 25 of 31, who had a view beyond the August meeting forecast rates at their current level or 4.35% by end-September. Six saw rates at 4.60%.

Median forecasts showed rates at 4.35% until the end of the first quarter in 2024. That was 25 basis points lower than in a snap poll conducted after the July meeting.

(Reporting by Devayani Sathyan; Polling by Susobhan Sarkar and Veronica Khongwir; Editing by Ross Finley & Shri Navaratnam)