sydneythe reserve bank of australia is keeping a watchful eye on medium and longterm inflation expectations warning in minutes of its july 5 policy meeting that the cost to economic growth and employment in the long run will be higher if the psychology around inflation deteriorates the minutes published tuesday also show that the rba is currently happy that longterm inflation expectations remain largely anchored if mediumterm inflation expectations were to adjust upward the task of returning inflation to the 23 target would be more difficult and would come at a higher cost in terms of activity and employment the rba said while shortterm inflation expectations had risen with actual inflation longerterm measures of inflation expectations were well anchored the minutes added the rba is expected to deliver a further 50basispoint increase in august taking the total increase in the official cash rate to 175 basis points since may some economists are betting that the rise next month could be 75 basis points or even 100 basis points the rba also said it is grappling with its estimate of where a neutral cash rate might be saying that various methods of calculating it produce a wide range of results a neutral cash rate where policy settings are considered neither expansionary nor contractionary is something that cannot be observed directly and must be inferred from economic data adding an additional level of uncertainty it said members agreed that further steps would need to be taken to normalize monetary conditions in australia over the months ahead the minutes said the size and timing of future interestrate increases will continue to be guided by the incoming data and the boards assessment of the outlook for inflation and the labor market including the risks to the outlook the minutes added secondquarter inflation data in australia due next week is set to show the highest rate of consumerprice gains since the early 1990s potentially putting pressure on inflation expectations the australia  new zealand banking group ltd forecast earlier tuesday that the rba will need to raise the official cash rate above 30 by the end of this year to contain inflation the cash rate now stands at 135