The Reserve Bank of Australia will increase the official interest rate from 2.6 to 3.1 per cent at its board meeting on Melbourne Cup day next week and keep going to 3.85 per cent, Westpac chief economist Bill Evans says.

Westpac was the last big four bank to revise up its interest rate forecasts after Wednesday’s shock 32-year-high inflation rate, which rocked the outlook for the Australian economy just a day after the federal budget.