Westpac flags risk of back-to-back RBA tightening if data surprises to upside

Westpac’s Ellis says a second RBA rate hike in March is possible if data momentum builds, though May remains the central case.Summary:Westpac’s Ellis says a second RBA hike as early as March cannot be ruled outMay remains the central case, but data momentum is keyRBA seen unhappy with current inflation trajectoryQuarterly inflation data remains the primary triggerMarket focus turns to January data and Q4 wages, GDPVia a Bloomberg interview published Wednesday, summarised here.The Reserve Bank of Australia could be forced into a rare back-to-back rate hike as early as March if incoming data continues to surprise on the upside, according to Luci Ellis, underscoring how uncomfortable policymakers have become with the current inflation outlook.Ellis said that while her central forecast remains for a follow-up move in May, a March hike cannot be ruled out if economic momentum builds further ahead of the next meeting. The warning comes after the RBA this week became the first major central bank globally to lift rates in 2026, marking a sharp pivot after months of struggling to rein in resurgent inflation pressures.Markets and economists have largely converged on May as the most likely timing for a second hike, reflecting the RBA’s preference to lean more heavily on quarterly inflation data. Governor Michele Bullock has signalled that the bank’s new monthly CPI series has yet to become a decisive policy input, reinforcing expectations that first-quarter inflation data will be critical.However, Ellis said the tone of the governor’s post-meeting press conference made it clear that the RBA is dissatisfied with the inflation path embedded in its forecasts. Policymakers want inflation to fall more quickly, raising the risk that patience could wear thin if near-term data continues to point to persistent price pressures.Before the March meeting, the RBA will receive January inflation and labour market reports, alongside key fourth-quarter releases on wages and GDP. If those data confirm stronger-than-expected momentum, Ellis said the hurdle for a March move could be cleared.For now, May remains the base case. But the balance of risks has shifted, with the RBA signalling it is prepared to act again if inflation progress fails to accelerate.—The next Reserve Bank of Australia (RBA) monetary policy meeting in 2026 is scheduled for 16–17 March.
This article was written by Eamonn Sheridan at investinglive.com.

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