Westpac Stands Alone in Predicting Further Cash Rate Hikes

Westpac has maintained its forecast for two more cash rate hikes this year, even as other major Australian banks begin to predict when rate cuts might occur. The bank's chief economist, Luci Ellis, expressed increased confidence that the Reserve Bank of Australia (RBA) will raise the cash rate in August, citing strong inflation and labor market data, along with the RBA's communication signaling further hikes.

While Westpac still expects a follow-up rate hike in September, Ellis noted that the certainty of this move has decreased. She acknowledged scenarios where the second hike could be delayed or skipped entirely. This positions Westpac as the lone major bank predicting further rate increases, as NAB, ANZ, and CBA anticipate a hold at 4.35% until at least mid-2027.

Ellis also adjusted Westpac's outlook for rate cuts, moving them forward by a year to August 2027, though she emphasized the RBA's cautious approach based on past experiences. She described the easing cycle as gradual and data-dependent, with cuts likely to proceed at a pace of 25 basis points per quarter.

Meanwhile, ANZ has specified its expectations for rate cuts, projecting two 25 basis point reductions in August and November 2027, as economic cooling under higher borrowing costs becomes more apparent.