The Westpac Banking Corp (ASX: WBC) share price was out of form on Thursday.
Australia's oldest bank's shares ended the day 1% lower at $24.24.
But that couldn't take the shine off what was a very positive month for the Westpac share price.
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How did the Westpac share price perform in March?
Despite its end of month blip, the Westpac share price climbed 6% over the month of March.
This has stretched its year to date gain to a sizeable 12%, which compares very favourably to the ASX 200 index and its 1.2% decline in 2022.
Investors were bidding the big four banks higher last month after it became apparent that the Reserve Bank of Australia would be lifting rates much sooner than expected.
This would be good news for the banks as it would be a big boost to their interest income, which has been under significant pressure with rates close to zero.
What's the outlook on rates?
According to the most recent Westpac Weekly economic report, its team are forecasting the central bank to make its first cash rate increase in August, followed by a second hike in October. It explained:
"Our forecast, prior to this update, was for the RBA to raise the cash rate by 15 basis points in August; to be followed by 25 basis points in October; and 25 in February; May; August; and December in 2023; with the final 25 in February 2024.
We now expect the RBA to bring forward the third hike from February, 2023 to December 2022, and follow the same pattern throughout 2023 with the cycle ending in November 2023 rather than February 2024.
This would mean that the RBA would end 2022 having restored the 65 basis points of emergency cuts which it implemented during Covid."
Though, Westpac acknowledges that its forecasts are "significantly more modest" than what the market is expecting. This is on the belief that the FOMC and RBA will make "more progress in settling inflation and tempering demand than is expected by the market."
Nevertheless, there's no denying that the outlook for Westpac and the rest of the banks has improved meaningfully since this time last month.
