A major review of Australia's central bank will take place amid a backdrop of worsening economic conditions which will likely heighten the scrutiny of its core objectives.
Surging inflation, prompting stronger and steeper rate hikes, could mean the possible overhaul of the Reserve Bank's mandate will take place at a point in time where the calibration of settings are running in overdrive.
On Tuesday, the RBA lifted the official cash rate to 1.85 per cent one week after Treasurer Jim Chalmers indicated inflation was forecast to hit 7.75 per cent by the end of the year.
Australia's rising inflation is at its worst point since the 1990s.
RBA Governor Philip Lowe, in his decision statement, conceded the path to tackle inflation had become more difficult, lamenting hits to household spending and confidence were showing signs economic conditions had worsened.
"The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments," Dr Lowe said.
"The outlook for global economic growth has been downgraded due to pressures on real incomes from higher inflation, the tightening of monetary policy in most countries, Russia's invasion of Ukraine and the COVID containment measures in China."
Further hikes are expected and major banks are now pricing an interest rate at around 3.35 per cent by February next year, while the Treasurer's bleak outlook comes only a fortnight after he invoked a wide ranging review into the RBA
Dr Chalmers' review will outline if changes to the Reserve Bank Act, governance structure, culture and mandate are needed to ensure monetary policy can adequately respond to future economic risks.
However, economists believe recent inflationary spikes, caused mostly by COVID-19 supply disruptions and the Ukraine conflict, will place added pressure to the review, particularly around the bank's response mandate.
ANU professor Warwick McKibbin believes the current cost-of-living pressures will highlight the effectiveness of the RBA's current inflation targeting program and whether it needs to be recalibrated.
He says this is particularly evident in the emergence of new risks, such as climate change.
"The question is, would you behave differently in 2021 if you had a different mandate?" he said.
"I just think you can do better.
"Inflation targeting is better than the previous regime's were by a long way. But the question now is, how much do we think the shocks coming our way will be better handled by a different regime?"
Dr Chalmers outlined in his terms of reference that Australia's economic environment is changing rapidly, identifying part of the review needed to look at the intersection of both fiscal and monetary policy.
Professor McKibbin noted the federal government's climate policy would also need to synergise with both major economic levers, claiming the decarbonisation of the economy is a major structural overhaul.
"Climate policy is a massive restructuring of the global economy," he said.
"When you're working at a national strategy, all three have to work together.
"You don't want to have policies which are offsetting each other and destroying each other's targets."
Criticism has also erupted over the bank's recent interest rate decisions, particularly around allegations of miscommunication over its timeline to lift the cash rate.
A forward guidance statement during the height of the pandemic outlined the RBA was expected to hold the cash rate until at least 2024.
Australia's cash rate hit 0.1 per cent during 2020 in response to the pandemic and to try and inject the economy with more liquidity.
Increased levels of liquidity were installed to try and cushion the blow of the financial cost of lockdowns and possible mass stand down of workers.
Analysts and market predictors in 2021 believed rates would start rising by 2022, as a result of global inflationary pressures, causing other major banks to lift rates.
Economist Saul Eslake said issues with the bank's monetary policy stem back all the way to 2016, when the RBA refused to cut rates earlier to spur on inflation growth.
Prior to the pandemic, Australia's inflation in 2019 was below the bank's target range of 2 to 3 per cent, however, Dr Lowe did not respond.
Mr Eslake said a review during the current inflation target would provide more ammunition to critics of the bank.
"Up until about five years ago, you wouldn't have found many serious critics of the way Reserve Bank had operated," Mr Eslake said.
"It left interest rates unchanged from basically the month that Phil Lowe became the governor until a month after the 2019 election, despite the fact that inflation was consistently below its target and unemployment remained stubbornly above 5 per cent."
The economist also noted the RBA was the only central bank in the world to put a date on how long it would keep interest rates at record lows.
Recent communication mishaps of the bank represent a systemic issue relating to how the board is structured, with a number of commentators urging for more experts to be placed within the RBA governance structure.
There is wide criticism the make-up of the board is stacked with industry figurehead with sectoral interests.
"I think Australia would be better served by having monetary policy decisions made by a body that consists of people who know something about monetary policy," Mr Eslake said.
The review chaired by an independent panel of experts is expected to be handed to the Treasurer in March, with expectations reforms could be made next year.