Westpac eyes three more RBA rate hikes, sees 4.85% peak
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The news: Westpac has added two more rate hikes to its near-term RBA policy forecast, with three now expected this year.
The move reflects a longer-than-expected conflict in the Middle East and early signs of strong second-round pass-through from fuel to other prices.
The numbers: The lender now expects the RBA to announce 25-basis-point rate hikes in both June and August, in addition to the 25-basis-point hike already forecast for May.
The peak for the cash rate is now expected to be 4.85%.
The revised forecast pushes out the date for rate cuts to 2028, with one per quarter now expected in February, May, August and November 2028.
The context: Westpac chief economist Luci Ellis said the shift reflects longer disruption to, and slower recovery in, fuel supply assumed in the bank’s revised baseline forecasts published on Friday.
It also reflects the “surprisingly rapid” pass-through of higher fuel and other oil-derived product prices into other prices in Australia, she said.
The move mirrors a change in expectations by UBS, announced on Friday. The investment bank added a further rate hike to its previous forecast, now seeing an additional 25-basis-point lift in August as well as May or June, rising to a new cycle high of 4.60%.
The source: Westpac
