In recent weeks, economists and the market have signalled the Reserve Bank will be forced to hike the cash rate earlier than first predicted due to soaring inflation rates observed globally.

Those signals were further reinforced last week when the US Federal Reserve flagged its intention to raise its interest rate as early as March due to inflation in the major economy being above its 2 per cent trend line.

Domestically, this has happened in Australia. In the most recent consumer price index data from the Australian Bureau of Statistics, CPI for the December quarter rose 1.3 per cent, while the annual change came in at 3.5 per cent.

Both figures outperformed expectations and were above the RBA's inflation target band of 2 to 3 per cent, which would spark considerations of changes to existing monetary policy settings.

The ABS in its CPI update flagged inflation was largely driven by housing prices, which have been rising due to the demand for new dwellings and a drive up in costs from a lack of construction supplies.

Record low lending rates were also a factor to surging house prices across the country and have been underpinned by the RBA's 0.1 per cent cash rate stance.

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Tuesday's interest policy decision is expected to show updates in the central forecasts, with expectation of faster inflationary rises and an unemployment rate touted to fall into the 3 per cent range.

These are good signs the economy is roaring back in the words of Treasurer Josh Frydenberg.

But the RBA and its governor Philip Lowe are between a rock in a hard place.

The central bank will be cautious about putting the brakes on too early. It won't want to be seen as slowing down the economy while the road out of the pandemic remains uncertain.

Omicron has reinforced that uncertainty with state governments like NSW implementing support packages for business impacted by staff shortages and isolation.

Commonwealth Bank has also backed further pandemic support for disrupted businesses.

Alternatively, the RBA will need to factor in whether higher levels of inflation are sustainable within the economy for long-term growth.

Westpac began the rate speculation with the first hike likely to occur in August and NAB last Thursday placed its bets the central bank would gradually begin, hiking the rate to 0.75 per cent from November.

Dr Lowe previously said the bank was "prepared to be patient", so wages growth had time to catch up. However, a small rise in the pay packet for mortgage holders already at borrowing capacity may not see this as an attractive compromise.