The Reserve Bank of Australia (RBA) has decided to keep the interest rate on hold. Westpac Banking Corp (ASX: WBC) has revealed what it thinks will happen next.
After three rate rises in 2026 already, Australia’s central bank has decided to wait and see how its economic tightening (and the Middle East treaty) plays out.
Economists from Westpac have outlined what they think is going to happen next with interest rates.
Westpac view on the RBA statement.
Economists at the ASX bank share noted that the RBA’s decision to hold the cash rate at 4.35% at its June meeting was “universally expected”. However, what wasn’t as widely expected (though Westpac wasn’t totally surprised), was that the RBA signalled rate hikes are still possible.
Westpac noted that the RBA added the phrasing “including increasing the cash rate target further if required” to achieve its policy goals.
The ASX bank share said that this was stronger wording than in recent statements, so it suggests the RBA “wanted to hose down recent speculation that they are done hiking rates.”
Further rate rises are coming?
The Westpac economist team think that “further cash rate increases are coming” on the back of the June quarter inflation (trimmed mean) which is expected to be strong.
Westpac ‘s economists then suggested that the rate rise could come at the August meeting, though a longer pause could occur if the “next few inflation prints are less alarming”. The economists are expecting the inflation direction to travel “most likely up”.
Westpac’s economists suggested that it will take “a further unexpected weakening in the domestic economy – and a better inflation outlook – to entirely prevent further cash rate hikes from here.”
The RBA statement highlighted that Australian inflation is “still too high” and a period of slower growth would be needed to get inflation back to the target range.
Westpac noted that the RBA has not been spooked by soft data related to consumer spending and the labour market.
Final thoughts on the RBA interest rate
It’s certainly true that inflation has not been tamed yet. Time will tell how long it will take with higher interest rates.
This certainly makes it seem like higher interest rates are here to stay for a while.
With that in mind, I think there are a number of ASX growth share that look very attractive as long-term buys today.
