The central bank's board will meet on Tuesday to discuss the state of the economy after new inflation data was released last week.
The consumer price index rose at an annual rate of 6.1 per cent in the June quarter, the fastest yearly growth since 2001.
It was followed by a 5.6 per cent lift in the Producer Price Index, which measures wholesale costs for Australian businesses, on Friday.
Now, the RBA must factor the increases into its monetary policy efforts to push the rate of consumer price growth back to its preferred target band of two to three per cent.
The urgency for action increased after Treasurer Jim Chalmers gave an economic update to federal parliament, warning inflation was still rising and would likely peak in the December quarter at 7.75 per cent.
The consensus of financial market economists is for the RBA to raise the cash interest rate, for the fourth time in a row, by 50 basis points to 1.85 per cent.
A 50 basis point rate increase will see the average mortgage holder on a variable interest rate paying an extra $610 per month to service their loan compared to four months ago.
But some economists aren't ruling out the possibility of a stronger response by the RBA, arguing the central bank could push the cash rate to around two per cent.
Graham Cooke, head of consumer research at Finder, said money was already tight for many Australians.
"With inflation skyrocketing to 6.1 per cent - its highest level in more than two decades - many homeowners will be hit with a fourth hike to their mortgage," he said.
"This could cost an average mortgage holder a whopping $7,300 extra per year compared to what they were paying in April."
The central bank will remain in focus later in the week when it releases its quarterly monetary policy statement containing the RBA's latest economic forecasts.
The projections due on Friday will be studied to see how they compare with the revised Treasury numbers revealed by Dr Chalmers last week.
Treasury's latest estimate is for the economy to grow by three per cent in 2022/23 and two per cent in 2023/24.
Both forecasts were downgraded by half a percentage point from the previous outlook in April.
Treasury is also forecasting inflation to fall to 5.5 per cent by mid-2023, 3.5 per cent by the end of that year and 2.75 per cent by mid-2024.
Also due this week are housing, consumer sentiment and jobs data, including the CoreLogic Home Value Index for July.
Meanwhile, Australian shares are poised to start the week higher after US stocks continued a month-long rally on Friday.
The US S&P 500 rose 57.86 points, or 1.42 per cent, to 4130.29, while the Dow Jones Industrial Average was up 315.5 points, or 0.97 per cent, to 32,845.13. The Nasdaq Composite index lifted 228.1 points, or 1.88 per cent, to 12,390.69.
Australian share futures rose 46 points, or 0.67 per cent, to 6906.
The benchmark S&P/ASX200 index closed up on Friday, rising 55.5 points, or 0.81 per cent, to 6945.20 with gains across almost every sector.
9°C