An ongoing challenge for the Reserve Bank, trying to keep inflation under control

Westpac's quarterly Economic Overview predicts the Official Cash Rate to reach a peak of 3.5 percent by the end of this year, from a previous forecast of three percent.

It expects that to include a series of 50 basis point increases in the coming months.

Acting Westpac Chief Economist Michael Gordon says interest rates are already baking in the idea of the OCR rising.

He says we're already seeing the impact it's having on the housing market, which will have an effect on households' willingness to spend.