Economists now believe the Reserve Bank of Australia (RBA) will hike the cash rate higher than previously expected in a bid to tackle rising prices.
The RBA has been hiking the cash rate, which banks use as a guide for interest rates, in part to tackle the soaring inflation rate.
Yesterday's inflation data showed a higher rate of inflation than many were predicting, with it up to 7.3 per cent over the past year.
That's the steepest annual rise since 1990.
On Thursday morning, Westpac said in a briefing note that it now expected the RBA board to hike the cash rate by 0.5 per cent when it meets on Tuesday.
This would mean a bumper rate hike for borrowers on Melbourne Cup Day.
The cash rate is currently at 2.6 per cent, which means it could be above 3 per cent by Tuesday. It was at the historic low of 0.1 per cent until May.
Westpac also now expects the cash rate to get up to 3.85 per cent by March.
That is up from its previous forecast of 3.6 per cent.
"The September quarter inflation report has come as such a major surprise that we think the Reserve Bank Board will decide to raise the cash rate by 50bps at the next Board meeting on November 1," Westpac wrote.
CBA also upgraded its forecast for the peak RBA cash rate, after the hotter-than-expected inflation data.
It now expects it to get to 3.1 per cent in December.
Previously, CBA was expecting 2.85 per cent by November. But it now expects an additional 25-basis-point rate hike in December.
Barranjoey's chief economist, Jo Masters, is also tipping a higher than previously expected rate hike of 3.6 per cent, with the 50-basis-points hike expected on Tuesday.
ANZ benefits off higher interest rates
Meanwhile, ANZ has posted annual results that show how nicely the financial sector is doing now that interest rates are higher.
The bank posted yearly results showing its cash profit was up 5 per cent, to $6.5 billion.
Despite this, ANZ stock ended more than 3 per cent down.
The financial sector, overall, was a drag on the Australian share market on Thursday, with it being one of the only sectors that ended the day down.
At the end of the trading day, the benchmark was up 0.5 per cent, helped by mining and energy stocks.
Ramelius Resources had the biggest gain, with a boost of 8.4 per cent.
Meanwhile, another company that digs copper, Sandfire, also ended up 7 per cent.
The benchmark is, overall, at a 20-day high.
Meanwhile, the ASX 200 was gaining, despite falters on Wall Street.
The Dow Jones was flat, while the S&P 500 and Nasdaq lost ground overnight with the tech-heavy sector down 2 per cent.
Shares of Facebook owner Meta dived 17 per cent as its fourth-quarter forecast failed to please investors.
