Westpac and Bendigo Bank have redrawn their official cash rate forecasts as major bank economists remain split on the Reserve Bank’s next move.
Westpac and Bendigo Bank have updated their official cash rate forecasts after the Reserve Bank Monetary Policy Board overwhelmingly voted to raise the cash rate on 5 May, with the major banks now split on the RBA’s thinking moving forward.
In its latest rate call, Westpac said it continued to predict two additional rate hikes this year, even after May’s move unwound the entirety of the 2025 easing cycle.
Chief economist Luci Ellis explained that the bank had shifted its expected timing from June and August to August and September.
Ellis said the post‑meeting press conference suggested that the board wanted room to assess how the Middle East conflict and associated oil shocks would unfold before moving again.
“We still expect two more RBA rate hikes after the one this week. However, as we now think that the Monetary Policy Board (MPB) will want to pause in June,” Ellis outlined.
“In the post-meeting media conference, Governor Bullock characterised the three rate hikes so far as dealing with the high inflation issue that already existed before the conflict in the Middle East started, and that this ‘gives space’ for the MPB to see how the conflict plays out.
“Together with the dissenting vote, we read this as saying that another back-to-back hike in June is no longer a better-than-50 per cent chance. It is not a zero chance, either, but it should not be the base case.”
Westpac’s revised timing is also tied to a more pessimistic assessment of how fuel‑driven cost pressures will filter through the economy.
Ellis noted that the RBA had acknowledged the risk of broader “second‑round” price effects but said that official forecasts may still be underestimating the scale of the pass‑through.
“Our assessment is that there will be more of this than the RBA forecasts imply, especially in areas such as home-building costs,” she said.
“It should also be noted that our inflation forecasts are based on our own forecasts for oil and fuel prices, which track somewhat higher than the futures curve that the RBA uses as a technical assumption in its forecasts.”
On this basis, Ellis said Westpac now viewed the June and September‑quarter inflation data as the key catalyst for the final legs of the tightening cycle.
“We therefore push the timing of these two hikes out to August and September,” she said.
“We think the Q2 and Q3 inflation data will be something of a ‘wake-up call’ on the willingness of firms to pass on increases in non-labour costs into their own prices (though this is something we would be glad to be wrong about).”
Westpac’s stance means it remains at the hawkish end of major‑bank forecasts.
National Australia Bank (NAB) is currently flagging one more 25‑basis‑point hike in June before an extended period on hold, while the Commonwealth Bank of Australia (CBA) and Australia and New Zealand Banking Group (ANZ) believe May marked the final move of the cycle and expect the cash rate to stay at 4.35 per cent for the foreseeable future.
Bendigo Bank flags 1 last rise
Bendigo Bank has also updated its outlook following the May meeting, with chief economist David Robertson emphasising how quickly the policy backdrop had turned since late 2025.
“The third RBA policy meeting for 2026 delivered the third consecutive rate hike, taking us back to a cash rate of 4.35 per cent and unwinding all of 2025’s easing cycle,” Robertson said.
Robertson explained that Bendigo now expected one more move from the RBA rather than a longer series of increases, which would take the cash rate to its highest point in over 15 years.
“Albeit at a faster pace than originally forecast, we can expect another hike to 4.6 per cent later in the year,” he said.
[Related: Majors split on next RBA move after rate hike]
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