Westpac brings forward rate hike call to September

Marina Karpathios
05:20pm September 21 2026

Earlier this month, Westpac chief economist Luci Ellis noted that “the probability of the September scenario is not zero.”  

That possibility has now become Westpac's base case, with Ellis forecasting the Reserve Bank of Australia (RBA) will decide on a 25 basis point rate hike at its next meeting on 29 September, lifting the cash rate to 4.6 per cent.  

The revised outlook reflects growing signs that inflation may prove harder to bring under control than previously expected.

Ongoing wars in Ukraine and Iran have resulted in increases in oil and energy prices, which could flow through to the cost of goods and services. 

At the same time, stronger inflation readings have reinforced concerns that price pressures are lingering in parts of the economy. 

Ellis said the RBA's own messaging has also shifted. RBA Governor Michele Bullock recently signalled that some of the factors that could push inflation higher are beginning to emerge, increasing the likelihood of further action from policymakers to return inflation to the RBA's 2 to 3 per cent target range.

While a September increase is now Westpac's base case, Ellis said the decision is unlikely to be straightforward.

Members of the RBA's Monetary Policy Board are expected to hold differing views on issues including the strength of the labour market, productivity growth and how much spare capacity remains in the economy.

"We continue to expect a split vote at the meeting," Ellis said. 

Ellis also warned there is "a risk of a follow-up hike" if inflation remains elevated and economic data continues to surprise on the upside.

Even so, Westpac's broader view remains that interest rates will eventually move lower, with rate cuts still expected to begin from August 2027. 

For now, all eyes remain on inflation data. For households, it remains the key factor shaping the outlook for interest rates and the cost of borrowing.

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