Major bank pulls about-face on interest rate future

by Adam Smith18 Mar 2014
A major bank has reversed its prediction that rates are set to drop further in 2014, and is now predicting a rise next year.

Westpac had previously predicted two further rate cuts before the end of 2014. Chief economist Bill Evans has now pulled an about-face, and has instead forecast that the RBA will remain on the sidelines for the rest of the year.

Instead, Evans has forecast the beginning of a new tightening cycle, with the first 25bp interest rate hike occurring in the third quarter of next year.

"We still see those forces operating to moderate growth and inflation pressures but now assess that better news on employment, consumption and business confidence will dampen those contractionary forces to exclude a sufficiently strong case to cut rates," he said.