Westpac Predicts November Rate Hike as Energy Prices Fuel Inflation Concerns

Westpac warns that another Reserve Bank of Australia (RBA) rate hike could be just weeks away, citing concerns over energy prices and domestic inflation risks. The RBA lifted the cash rate by 25 basis points to 4.6% in September, a move widely anticipated by financial markets.

The bank joins ANZ as the second major bank to forecast another rate increase in November. Westpac chief economist Luci Ellis stated that the RBA's latest messaging suggests a follow-up rate rise in November has become the most likely outcome.

Ellis noted that the central bank's post-meeting statement emphasized conflict in the Middle East had driven global energy prices 'much higher' than assumed in its August forecasts. The language was stronger than typically seen in RBA communications and pointed to growing concern that higher oil and energy prices could flow through to broader inflation.

The RBA's shift in tone marks a significant change from August, when an extended hold of the cash rate appeared the most likely path. Ellis stated that the bar for a follow-up hike in November is low, and judging by Tuesday's rhetoric, a November hike is now the base case.