Westpac anticipates the RBA will hold rates steady next week but expects further hikes in August and September amid persistent inflation.
Westpac expects the Reserve Bank of Australia to keep the cash rate unchanged at its June 15-16 meeting, marking a pause after three consecutive increases. The decision reflects a balancing act between weak consumer spending, housing trends, and elevated inflation pressures, alongside strong data centre investment.
The bank revised its headline inflation peak forecast downward to 4.7% from 5.0%, citing lower oil prices, while trimmed mean inflation is now projected at 3.8% year-over-year, down from 4.0%. Despite the downgrade, inflation remains above the RBA’s own projections, supporting the case for further tightening.
Westpac maintains its call for rate hikes in August and September but notes risks are skewed toward a smaller cycle, with zero or one additional hike more likely than three. The outlook leaves room for AUD and rates volatility as markets await upcoming economic data.