Westpac Defies Rate Hike Bets Amid July Inflation Surprise

The Reserve Bank of Australia (RBA) is facing increased pressure to raise interest rates after a hotter-than-expected July inflation print. Westpac, however, remains cautious and expects the RBA to hold rates for the rest of the year.

According to Westpac's analysis, monthly inflation rose 1.0% in July, with the core trimmed mean measure up 0.5%, both surpassing expectations. This has sparked speculation about a possible hike, but Westpac believes that the increased risk of a November move is not enough to justify an immediate rate increase.

The bank points to more stable housing cost inflation as one reason for caution. New dwelling costs and rents came in broadly as expected, with Westpac noting that the ongoing housing market downturn is limiting developers' ability to pass on higher trade material costs to buyers.