Mortgage holders dodged a rate hike bullet on Tuesday - but economists warn there could be further interest rate pain to come.On Tuesday, the Reserve Bank of Australia held the official cash rate at 4.35 per cent, although it cited they would lift interest rates further. RBA governor Michele Bullock revealed the board had discussed a rate hike – which it did not do at its May meeting – and said there could be further rate hikes as it focused on ensuring high inflation did not become embedded.Ms Bullock said the RBA board “remained serious” about getting inflation under control, despite criticism they had moved too slowly. “We’ve raised three times. And we raised before any other central bank did. And some others are now raising,” she said.“So I think we’ve demonstrated that we will react when we need to and we’re serious about it.“I think the message I’m giving you today is that we remain serious about it. “The board did not discuss cuts. It only discussed the possibility of a raise.”Markets immediately repriced the chances of a rate hike following Tuesday’s announcement, up from a 15 per cent chance to a 47 per cent chance by the end of the year. VanEck head of investments capital markets Russel Chesler warns the money markets could be “seriously underestimating” the risk of further rate hikes.“While the market is not predicting another increase to the cash rate this year, we think that the market could very well be wrong,” he said.“On the data currently in front of us, there remains a strong case for the RBA to hike again.”Mr Chesler points to the all important trimmed mean inflation rate – which the RBA monitors as it strips out the top and bottom 15 per cent – came in at 3.8 per cent, well above the 2 to 3 per cent target band. “We have broad, domestically driven pressures, not temporary price movements the RBA can easily look through – housing remains the biggest pressure point, rising 6.8 per cent over the year to 30 June 2026, driven by electricity prices increasing 22.4 per cent, new dwelling costs rising 5.8 per cent and rents climbing 3.6 per cent,” he said. KPMG chief economist Brendan Rynne agreed, saying the Reserve Bank is stuck between a rock and a hard place. “It is trying to bring inflation back to target without causing unnecessary damage to the labour market, but ultimately its primary responsibility is price stability,” he said.“On balance, we would not be surprised to see another rate increase in the coming months if inflation and labour market data remain stubbornly strong.”Mr Chesler warned markets will be watching upcoming inflation data with there likely to be a bump in fuel prices by the time the next set of results are released by the Australian Bureau of Statistics. The Albanese government temporarily cut the fuel excise and GST windfall due to surging petrol prices in April, which saved motorists 32 cents a litre.But this has since been wound back, before completely stopping in August. Mr Chesler also said a 6 per cent jump in the minimum wage also added pressure, while household spending has remained strong. “Michelle Bullock has explicitly warned that the board remains prepared to make “difficult decisions “and implement further rate hikes if inflation fails to come down as expected,” Mr Chesler said.“So, there could very well be one more rate hike in this cycle.”“The RBA will be watching the second quarter wage’s growth numbers and July CPI due to be released later this month.”Read related topics:Reserve Bank