🔥 Trending Westpac Interest Rate Cut Forecast: What Homeowners Need to Know

As of July 2026, Westpac's interest rate forecast for Australia has undergone significant revisions, moving away from earlier expectations of rate cuts. The current outlook suggests a period of holding rates steady, with some economists even predicting potential hikes ¹⁵.

Westpac's Revised Forecast

Westpac initially expected two 25 basis point rate cuts from around mid-2026 ¹. However, this expectation has been reversed due to recent economic data, particularly higher-than-anticipated inflation figures ¹².

Key points of Westpac's updated forecast include:

• Holding Rates Steady: Westpac now anticipates the Reserve Bank of Australia (RBA) will keep interest rates steady through 2026 ¹⁸. This is a material shift from their previous forecast of cuts ¹.
• Risk of Hikes: Some Westpac economists have warned of the possibility of two more interest rate hikes in 2026 as the RBA attempts to control inflation ⁵.
• May 2026 Hike Prediction: Alongside Commonwealth Bank (CBA) and National Australia Bank (NAB), Westpac has tipped another RBA rate hike in May 2026 ⁷.
• Uncertainty and Risks: Westpac acknowledges risks on both sides of their forecast, indicating the possibility of either a hike or a hold, depending on economic developments ⁸.

Factors Influencing the Forecast Change

The primary driver behind Westpac's revised forecast is the persistent inflation in Australia. Recent data, such as a 1.3% increase in the Consumer Price Index (CPI) in the September quarter, has led to a re-evaluation of the RBA's likely actions ². High inflation makes it less probable for the RBA to cut rates, as their mandate includes maintaining price stability ⁹.

Comparison with Other Major Banks

While Westpac's forecast has shifted towards holding or hiking rates, other major Australian banks have also adjusted their predictions:

• Commonwealth Bank (CBA): Like Westpac, CBA has changed its interest rate forecasts following recent inflation data ². CBA, Westpac, and ANZ previously expected a 25 basis point cut in November 2025, but acknowledged a "real risk" to this forecast ⁴.
• National Australia Bank (NAB): NAB scrapped its prediction of a November 2025 rate cut and now expects the RBA to hold rates until May 2026 ⁴.
• ANZ: ANZ economists also foresee an extended period of rates on hold, though they note a risk of a hike in early 2026 ⁸.

The general consensus among the "Big Four" banks has moved away from imminent rate cuts, reflecting the RBA's ongoing challenge to manage inflation ³⁴.

Implications for Borrowers and the Economy

An extended period of high interest rates or further hikes would have significant implications for Australian households, particularly mortgage holders ⁵. Higher rates increase borrowing costs, which can impact consumer spending and investment decisions ⁹. The RBA uses interest rates as a tool to influence economic activity and achieve its inflation targets ⁹.