This prediction has been brought forward from February 2023, now placing it as the earliest hike among banks - for now.
Westpac Chief Economist Bill Evans said the new prediction is very different to the RBA forecast.
"While we expect the omicron variant to lower Australia’s growth rate in 2022 from 6.4% to 5.5% in 2022 inflation; wage growth and unemployment forecasts are largely unchanged," Mr Evans said.
"Our forecasts are significantly different to the RBA’s forecasts and expect that if our forecasts prove correct the case for the first rate hike in the next tightening cycle by the August Board meeting in 2022 is strong."
The report from Westpac said underlying inflation will hit 2.25% by the end of 2022 and 2.5% by the end of 2023. Wages growth is expected to reach 2.5% in 2022, lifting to 3% in 2023.
Mr Evans also said it now looks highly likely that the Board will decide to cease bond purchases altogether at its board meeting in February.
Where do other predictions sit?
Westpac's latest prediction for an August 2022 cash rate now puts it well ahead of the other major banks in terms of when the RBA will lift the cash rate.
CBA's latest prediction stands at a November 2022 hike, while ANZ at the second half of 2023.
Not since November 2020 has Australia's central bank altered the cash rate, with that trend set to continue on in 2022 until inflation is sustainably within the target range.
It hasn't hiked the cash rate since November 2010.
In December Dr Philip Lowe flagged inflation has increased but in underlying terms is still low.
"The headline CPI inflation rate is 3% and is being affected by higher petrol prices, higher prices for newly constructed homes and the disruptions in global supply chains," Dr Lowe said.
"A further, but only gradual, pick-up in underlying inflation is expected with the central forecast for underlying inflation to reach 2.5% over 2023.
"The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3% target range."
Image by Daniel Lerman via Unsplash
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