After Wednesday's CPI release, Westpac kept its forecast that the Reserve Bank
of Australia (RBA) will raise rates in August. Westpac said May headline CPI
undershot expectations mainly due to falls in travel, clothing and recreation
prices that are largely seasonal, and this does not change its view that
underlying inflationary pressure is intensifying. The bank said May data more
strongly signals a widening second‑round effect from Middle East supply shocks:
rising costs for fuel, transport, plastics and chemical inputs are transmitting
beyond energy‑related goods. Westpac warned wage‑cost pressure in H2 2026 could
further lift inflation, especially in market‑based services. Policy supports,
including fuel excise relief, are expected to be withdrawn gradually over coming
months, keeping inflation risks alive beyond the August monetary policy meeting.
