"We've known for a while now that the RBA is keen to start removing its 3 per cent `emergency policy setting' at the earliest available opportunity, and November is looking increasingly firm," said Macquarie interest rate strategist Rory Robertson.

"Nothing is guaranteed, but the scenario of back-to-back 25 basis point hikes in November and December should be taken seriously."

A 25 basis point increase to the cash rate would add $40 to the average monthly payment on a $300,000 25-year home loan, while a 50 basis points increase, adds $80 to the same sized loan.

The RBA has made back-to-back increases in November and December 2003, Mr Robertson said.

ICAP economist Adam Carr said he expected the first increase in December, however, after RBA governor Glenn Steven's Senate testimony yesterday, the chance of a November rate rise also seemed likely.

"Stevens yesterday made me think that maybe there is a high probably for November (rise) because he seemed to explicitly tie the rate tightening cycle to inflation."

In the year to June, inflation eased to 1.5 per cent, as the weakness of the financial crisis rippled through the economy. It was the first time it dropped within the 2-3 per cent inflation target band held by the RBA since September 2007.

"The inflation targeting framework the Reserve Bank has been following for a decade-and-a-half will guide adjustments to interest rates," said Mr Stevens in his testimony yesterday. "These will be timely and ahead of a build-up of imbalances that would occur if interest rates were kept low for too long."

Mr Carr said the RBA was an inflation-targeting central bank and did not need to underscore its goal of containing inflation through rate rises.

"It didn't need to be said but (Mr Stevens) felt the need to say it," Mr Carr said.

The latest read on quarterly inflation will be released on October 28, the week before the RBA's November rate decision.

Home prices have increased 4.2 per cent in the year to June as low interest rates, boosts to the First Home Buyer's grant, and off-shore buyers of Australian property helped bolster prices.

BusinessDay