Sydney, Jan 30, 2026, 17:14 AEDT — Market closed
- Westpac shares (ASX:WBC) climbed 0.8% to A$38.82, with the stock fluctuating between A$38.51 and A$39.20 during the session
- Investors are zeroing in on rate-sensitive bank shares as the Reserve Bank of Australia prepares to announce its decision on Feb. 3
- The broader S&P/ASX 200 dropped 0.65% on Friday
Westpac Banking Corporation shares closed up 0.8% at A$38.82 on Friday, defying a sluggish broader market ahead of a hectic week for interest rates. The stock traded between A$38.51 and A$39.20, per Investing.com data, with the next earnings report scheduled for Feb. 16. 1
Monetary policy is the key focus right now. Stronger-than-expected core inflation data has traders pricing in a 73% chance that the Reserve Bank of Australia will hike rates by 0.25 percentage points on Feb. 3, according to swaps. Westpac and ANZ back a 25-basis-point increase after the trimmed mean CPI, which excludes extreme price moves, climbed 0.9% in the December quarter, pushing the annual rate up to 3.4%, Reuters reported. ANZ’s Adam Boyton believes the RBA will see “demand is running ahead of supply,” while EY’s Cherelle Murphy says “the case for tighter monetary policy is clear.” 2
Bank stocks face a tricky calculation. Higher rates may boost margins—the gap between loan earnings and deposit costs—but they also risk slowing loan growth and increasing pressure on highly indebted borrowers.
Westpac stood out as the broader market slipped. The S&P/ASX 200 dropped 0.65% on Friday, with decliners more than doubling advancers. Meanwhile, the local volatility indicator for ASX 200 options climbed to its highest level in a month, according to Investing.com data. 3
Offshore noise returned to center stage Friday, shaking global markets after reports linked former Fed governor Kevin Warsh to Trump’s likely choice for Fed chair. The news jolted the dollar and pushed bond yields up, Reuters reported. Damien Boey, strategist at Wilson Asset Management, noted that investors are zeroing in on the implications of a smaller Fed balance sheet. 4
This matters for Australian lenders since wholesale funding costs often track global rates and shifts in risk appetite, even if the local cash rate stays put. The impact isn’t always straightforward, but changes can appear swiftly in bank funding spreads.
The near-term setup is clear: if the RBA tightens, investors will focus on whether officials label it a one-off “insurance” hike or signal the beginning of a series. That distinction shifts how traders value bank earnings and dividends.
There’s a clear risk here. If the RBA stays put or hints that the inflation spike is short-lived, the rate trade might reverse. That would put pressure on bank stocks, which investors have leaned on as a reliable, high-yield haven.
The RBA decision on Feb. 3 will dominate next week’s calendar. Afterward, all eyes turn to Westpac’s results on Feb. 16 for updates on margins, bad debts, and home lending competition.
