A September cash rate rise is likely on the horizon as a major bank adjusts its forecast earlier and the RBA governor warns persistent inflation is still far above target.
Westpac has forecast an interest rate rise this month just 11 days from the board’s next meeting, as the Reserve Bank of Australia (RBA) concedes its concerns around inflation had materialised.
On Friday, Westpac predicted a September cash rate hike by 25-basis-points to reach 4.6 per cent, after calling a November rise just earlier this month.
In a statement to a parliamentary committee on Friday, RBA governor Michele Bullock said inflation was too high, despite a total cash rate increase of 75 basis points already this year.
Bullock’s comments came after the latest data showed the consumer price index (CPI) rose 3.5 per cent in the 12 months to July 2026, from 3.8 per cent in the 12 months to June.
She said occurrences since the latest August board meeting suggested that although growth in the economy was slowing, previously projected risks were materialising.
“At the time of the August board meeting, we assessed that the risks to that outlook were skewed to the upside,” Bullock said.
“Developments since then suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising.”
Bullock said that pressures such as the Middle East conflict, rising oil prices and higher costs for AI-related technologies were continuing to be passed down to consumers and were putting pressure on the economy.
“This was expected, but it is important that these effects remain contained and do not become embedded into price and wage setting decisions.
“Otherwise, inflation could prove more persistent and require a stronger policy response.”
Similarly to Westpac, National Australia Bank (NAB) has also predicted a September increase, with the possibility of another hike in November, while Commonwealth Bank and Australia New Zealand Banking Group (ANZ) expect just a November hike.
The major banks have also hiked their fixed rates, with Westpac increasing its lowest rates up to 0.45 percentage points on Friday, taking some of its fixed rates well over 7 per cent.
The move followed similar changes by NAB and ANZ on Thursday, raising their fixed rates by up to 0.20 percentage points.
According to data from Canstar, a total of 13 lenders have increased their fixed terms already this month.
Canstar.com.au’s data insights director, Sally Tindall, said the “trickle” of fixed rate increases had quickly turned into a “pile-on”, with three of the big four banks hiking rates in the last 24 hours.
“Fixed rates are now clearly moving in one direction and quickly. Lenders are responding to pressure from wholesale funding costs and the recalibration of their expectations for the cash rate,” she said.
Tindall said while mortgage holders had overwhelmingly opted for variable rates, waiting for the RBA to cut rates, sticky inflation was dampening the chances of relief for borrowers.
“The Board has reiterated a multitude of times that it will hike again if inflation doesn’t come down as expected,” she said
“With the next meeting just 11 days away, a hike will be front and centre of the discussions, and with today’s comments now on the record, it's difficult to see how we could walk away with another pause.”
Want to see more stories from trusted news sources?Make Real Estate Business a preferred news source on Google.
